Moderate Rehabilitation (Mod Rehab) Supplemental - Arbor Realty

Analysis

Small Multifamily Investment Snapshot — March 2025

Amid ongoing macroeconomic uncertainty, the small multifamily sector remains favorably positioned for stability as the structural need for affordable housing in the U.S. has supported the strength of the sector’s demand profile.

Articles

Top Markets for Rental Occupancy

Nationally, vacancies have risen, but the performance of rental housing is extremely localized. Out of the 75 largest U.S. metropolitan areas, the occupancy rate for all types of rental properties, including single-family rentals, 2-4 family, multifamily, and mobile homes, increased in 36 markets last year, while exceeding 95% in nearly one-third of all markets, according to an analysis of newly released U.S. Census Bureau data.[1] From Grand Rapids, MI, to Columbia, SC, the top markets for rental occupancy show where conditions are tightest and demand is strongest.

Current Reports

Single-Family Rental Investment Trends Report Q1 2025

Arbor’s Single-Family Rental Investment Trends Report Q1 2025, published in partnership with Chandan Economics, is an up-close look at the single-family rental (SFR) sector as it enters a period of normalcy after explosive pandemic-era growth. SFR maintains its balance with the support of a healthy set of fundamentals while capital markets rebound and rent growth moderates.

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Small Multifamily Price Growth Trends Show Stabilization

Small multifamily price growth trends indicate a stabilization may be ready to take hold. Expanding on the findings of Arbor’s latest Small Multifamily Investment Trends Report, our research teams more closely examined valuations to determine if trends in pricing and other fundamentals are supporting a turnaround.

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SFR Rent Growth: Top Markets and Leading Regions

Elevated mortgage interest rates and high home prices boosted demand for single-family rentals (SFR) last year, supporting the growth of rents in almost all of the 100 largest metropolitan areas. Pricing momentum, which averaged 4.5% nationally, was concentrated in affordable markets in the Northeast and Midwest, an analysis of Zillow’s Observed Rent Index data shows.

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Build-to-Rent’s Robust Activity Settles into Stable Pattern

Increasingly, single-family rental (SFR) operators have been relying on build-to-rent (BTR) development to satisfy their inventory needs. The popularity of BTR communities made economies of scale possible for the SFR sector in the recovery after the 2007 housing crisis and continues to fill a housing need nationwide. Now, newly released U.S. Census Bureau data shows that SFR development activity remained robust even as its momentum slowed, moving the sector into a more stable equilibrium.

Articles

Advancing Sustainability in CRE Finance in a Shifting Landscape

With political headwinds reshaping the corporate responsibility landscape, commercial real estate (CRE) leaders, policymakers, and academics recently gathered in New York City for the NYU Stern Chen Institute for Global Real Estate Finance’s 3rd Annual Symposium on Innovation & Sustainable Real Estate to discuss the future of sustainable real estate finance, investment, operations, and technology. In a series of panel discussions, industry leaders offered their perspectives on how sustainability is evolving in a new political environment and why green policies still make business sense.

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Dr. Sam Chandan Sees an Opportune Moment Emerging for Multifamily Buyers

Rental housing remains uniquely positioned for continued growth in an environment of economic volatility and political uncertainty, Dr. Sam Chandan, founding director of the C.H. Chen Institute for Global Real Estate Finance at the NYU Stern School of Business and founder of Chandan Economics, asserts in his video overview of Arbor’s Special Report Spring 2025.

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Home | Fannie Mae | Moderate Rehabilitation (Mod Rehab) Supplemental

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FANNIE MAE DUS^®

Moderate Rehabilitation (Mod Rehab) Supplemental

Arbor offers subordinate financing options for multifamily properties that have completed moderate rehabilitation.

Loan Amount	5-30 years; must be coterminous with the senior mortgage loan
Amortization	Up to 30 years
Interest Rate	Fixed and variable rate options available
Maximum LTV	Combined LTV as high as 75%, depending upon asset class and use of proceeds; may be higher for Multifamily Affordable Housing properties and assumptions
Minimum DSCR	Combined DSCR as low as 1.25x, depending upon asset class and use of proceeds; may be lower for Multifamily Affordable Housing properties
Mod Rehab Supplemental Mortgage Loan Timing	Within 36 months of origination of the Mod Rehab first mortgage loan; no one-year waiting period
Benefits	The Moderate Rehabilitation Supplemental Mortgage Loan is excluded from the one Supplemental Loan rule The loan sizing and pricing is comparable to the first lien mortgage loan Lower cost than refinancing Access to additional capital Certainty of execution Speed in processing and underwriting
Eligiblity	Stabilized Conventional, Multifamily Affordable Housing, Seniors Housing, Student Housing Properties, and Manufactured Housing Communities First Mortgage Loan identified as Moderate Rehabilitation Existing Fannie Mae fixed-rate or adjustable-rate mortgage loans Arbor must be the servicer of the existing Fannie Mae Mortgage Loan Fannie Mae must be the only debt holder on the property
Rate Lock	Standard Rate Lock
Accrual	30/360 and Actual/360
Recourse	Nonrecourse execution with standard carve-outs required for “bad acts” such as fraud and bankruptcy
Escrows	Replacement reserve, tax and insurance escrows are typically required, based on the resulting tier of the combined preexisting mortgage loan and Moderate Rehabilitation Supplemental Mortgage Loan
Third-Party Reports	Standard third-party reports, including Phase I Environmental Site Assessment, and a Property Condition Assessment, may not be required if certain conditions are met
Assumption	Loans are typically assumable, subject to review and approval of the new borrower’s financial capacity and experience
Tier Dropping	Permitted for fixed rate Moderate Rehab Supplemental Mortgage Loans
Rehabilitation Requirements	An average of at least $10,000 per unit of property improvements
Verification of Property Improvements	Lender must document all completed rehabilitation work and verify its completion through a site inspection if the work is not performed pursuant to a Completion/Repair Agreement or a Rehabilitation Reserve Agreement

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