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How Big is Small Cap Multifamily?

A closer look at the multifamily housing inventory in the United States and the size of the small cap investment opportunity.

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Multifamily Forecast: Investors Moving to Secondary Markets

The apartment sector has remained the darling of the commercial real estate for the past six years. This doesn’t appear to be changing anytime soon, as 2016 is expected to set a new record for multifamily mortgage origination volume. While multifamily’s position as top dog remains uncontested, savvy investors are altering their strategy for sourcing Read the full article…

GENERAL: 800.ARBOR.10

FREDDIE MAC®

Small Balance Loan Program

Arbor’s Freddie Mac Small Balance Loan program streamlines the entire loan process for multifamily acquisition and refinancing loans ranging from $1M to $7.5M.

Loan Amount $1 million – $7.5 million in all markets
Note: Deals greater than $6M and up to $7.5M in small and very small markets may be permitted, subject to Freddie’s approval of an exception request
Markets Nationwide
Unit Limitations
  • Loan amount ≤ $6M: no unit limitations
  • Loan amount > $6 million and ≤ $7.5 million: up to 100 units (above 100 units may be permitted, subject to Freddie Mac’s approval)
Loan Term Fixed-rate loan terms of 5, 7, or 10 years; hybrid ARM loan terms of 20 years with initial 5, 7 or 10 years fixed rates
Amortization Up to 30 years; interest-only options also available
Minimum DSCR 1.20 in Top Markets; 1.25 in Standard Markets; 1.30 in Small Markets; 1.40 in Very Small Markets.
Maximum LTV
  • 80% in top and standard markets
  • 75% if acquisition in small/very small markets
  • 70% refinance in small/very small markets

To determine market tier, please consult with your Arbor Relationship Manager

Full-Term Interest Only DSC/LTV Thresholds
  • Minimum DSC 1.35/maximum LTV 65% in top markets
  • Minimum DSC 1.40/maximum LTV 65% in standard markets
  • Minimum DSC 1.40/maximum LTV 60% in small markets
  • Minimum DSC 1.50/maximum LTV 60% in very small markets
Rate Structure Fixed and hybrid ARM loan terms available
Eligible Properties Multifamily housing, with five residential units or more, including:

  • Properties with tax abatements
  • Age-restricted properties with no resident services
  • Properties with space for certain commercial (non-residential) uses
  • Properties with tenant-based housing vouchers
  • Low-Income Housing Tax Credit (LIHTC) properties with Land Use Restriction Agreements (LURAs) that are either within the final 24 months of the initial compliance period or in the extended use period (investor must have exited)
  • Properties with local rent subsidies for 10% or fewer units where the subsidy is not contingent on the owner’s initial or ongoing certification of tenant eligibility
  • Properties with certain regulatory agreements that impose income and/or rent restrictions, provided all related funds have been disbursed
  • Loans secured by groups of contiguous and non-contiguous duplexes, triplexes and fourplexes may be permitted as part of a larger loan configuration, subject to additional restrictions
Eligible Borrower Limited partnerships; limited liability companies; Single Asset Entities; Special Purpose Entities; tenancy in common with up to five unrelated members; and irrevocable trusts with an individual guarantor
NET WORTH AND LIQUIDITY
  • Minimum Net Worth: Equal to the loan amount
  • Minimum Liquidity: Equal to 9 months of principal and interest
Occupancy Requirement Property must generally be stabilized at 90% physical occupancy for the trailing 3-month average prior to Underwriting
Tax & Insurance Escrows
  • Real estate tax escrows deferred for deals with an LTV ratio of 65% or less
  • Insurance escrows are deferred
  • Replacement reserve escrows may qualify for deferral for certain loans
Replacement Reserves Underwritten at a minimum $200 per unit per annum; replacement reserve escrow is required for properties with greater than 50 units, subject to acceptable property condition
Commercial Space Allowed up to 40% of total Gross Potential Rent; no more than 40% of Net Rentable Area
Recourse Nonrecourse with standard carve-out provisions required
Prepayment Declining schedules and yield maintenance available for all loan types; all prepayment options open for prepayment without penalty three months prior to maturity
Assumable Subject to approval and 1% fee
Rate Lock 60-, 90-, 120-, 150-, 180-day extended delivery options available
Freddie Mac Fee Nonrefundable application fee (0.1% of loan amount in all markets except top markets) collected at time of rate lock
Good Faith Deposit 1% of loan amount due upon acceptance and execution of the SBL Rate Lock Application; refundable post-closing
Top Markets New York-Kings-Queens-Bronx-Richmond-Rockland-Westchester-Suffolk-Nassau-Bergen-Essex-Hudson-Somerset-Middlesex-Passaic-Union-Monmouth-Morris (NY-NJ-PA); Middlesex-Norfolk-Suffolk-Essex-Plymouth (MA-NH); District of Columbia-Montgomery-Prince George’s-Arlington-Alexandria-Fairfax-Fairfax City-Falls Church City (DC-VA-MD-WV); Dallas (TX); Cook-Lake-DuPage (IL-IN-WI); Los Angeles-San Francisco-Sacramento-Contra Costa-Marin-Alameda-Orange-Santa Clara-San Mateo-San Diego (CA); Denver-Jefferson-Arapahoe-Adams (CO); Fairfield (CT); Miami-Broward-Palm Beach (FL); Dakota-Ramsey-Hennepin-Anoka (MN-WI); Washington-Clackamas-Clark-Multnomah-King-Pierce-Snohomish (OR-WA)

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