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GENERAL: 800.ARBOR.10

FRDDIE MAC®

Moderate Rehab Loan

Arbor offers a flexible liquidity source for properties undergoing significant renovation. It is a highly customized solution for borrowers experienced in completing moderate rehabilitation deals and allows for a wide variation in borrower term and structure needs.

Loan Terms
  • Deal specific/negotiated
  • Interest-only during renovation
  • Hedge: Uncapped during renovation; cap required post-renovation if not converted to fixed-rate
Eligible Sellers Approved Program Plus Sellers for Moderate Rehab Loans, depending on their rehabilitation experience and familiarity with our process.
Eligible Sponsors Experienced and well-capitalized sponsors who have successfully completed rehabilitation projects of similar scope and who are familiar with the Freddie Mac loan process.
Eligible Properties
  • $25,000-$50,000 in renovations per unit with a minimum of $7,500 per unit designated for interior work
  • Minimum occupancy: Rehabilitation plan may not take debt service coverage ratio below 1.0x on an interest-only basis
Loan Proceeds/Sizing Loan-to-value (LTV) ratio:

  • Fund up to 80% of the as-is value, supported by the property acquisition price if applicable
  • Periodic draws of unfunded loan proceeds (as opposed to an escrow) to reimburse the sponsor for up to 80% of the renovation costs on a monthly or quarterly basis as work is completed, similar to construction financing
  • Appraisal must demonstrate 75% as improved LTV (with fully funded renovation proceeds)

Debt coverage ratio (DCR):

  • Initial sizing – 1.20x interest only “as is”
  • An improved underwritten net operating income (NOI) per appraisal must reflect no less than 1.30x amortizing debt service coverage ratio and will be subject to appraisal support
Rehabilitation
  • Additional documents: Freddie Mac Disbursement Agreement, Disbursement Servicing Agreement, Operating Deficit Agreement & Completion Guaranty for 80% of approved budget and all work initiated
  • Property Condition Report: Must include reasonable confirmation of the budgeted scope of work
  • Draws: Monthly or quarterly; first draw will be based on a certificate from servicer to Freddie Mac confirming that request complies with requirements set forth in Disbursement Agreement (including but not limited to inspections, lien waivers and standard documentation); subsequent draws will require additional certifications as well as Freddie Mac’s independent confirmation of the information/documents supporting prior certificate
  • Monitoring: In addition to the draw certificates noted above, monitoring will incorporate quarterly progress reports and inspections, including rent rolls and operating statements
Loan Structure
  • Loan type: Float-to-Fixed
  • Conversion: Fixed rate after initial floating period; note rate to be determined at loan origination
  • Additional options: Varying combinations of fixed and floating structures will be considered on a case-specific basis
Prepayment Lock-out during rehabilitation period, standard Freddie Mac prepay structures available thereafter.
Fees Standard fees apply, including application fee and good faith deposit.

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