Articles

FHFA Loan Caps for 2025: What Multifamily Borrowers Need to Know

The Federal Housing Finance Agency (FHFA) announced a $3 billion boost to Fannie Mae and Freddie Mac’s volume cap for loan purchases in 2025 to $146 billion ($73 billion for each agency). This increase in FHFA loan caps for 2025 aligns with industry expectations, given the anticipation of improving market conditions and lending activity expected in a lower interest rate environment. Next year’s cap for the Government-Sponsored Entities (GSEs) is an increase of approximately 4% from the $140 billion limit set for 2024.

Analysis

U.S. Multifamily Market Snapshot — November 2024

The U.S. multifamily market held steady in a more normalized cycle through the first three quarters of 2024, following its skyrocketing recovery from the pandemic-related contraction. Rental demand remained strong, driven by the continued nationwide housing shortage and strong wage growth, while the high levels of new construction seen over the last two years appears to have peaked.

Current Reports

Small Multifamily Investment Trends Report Q4 2024

Small multifamily’s normalization pushed forward last quarter as the Federal Reserve made a long-awaited reduction to the target federal funds rate. Arbor’s Small Multifamily Investment Trends Report Q4 2024, developed in partnership with Chandan Economics, shows signs of stability have multiplied. Robust rental demand, a limited supply of quality affordable housing, and several other promising developments should support the subsector’s strength heading into 2025.

Analysis

Top U.S. Multifamily Rent Growth Markets — Q3 2024

The U.S. multifamily market held steady in a more normalized cycle during the third quarter of 2024. Rental demand remained strong, while new leaders emerged among the top markets for rent growth.

Articles

Top Markets for Wage Growth in 2024

One of the most essential factors multifamily investors need to consider before executing a transaction is the health of the local labor market. Wage growth and other trends are driven by a delicate, constantly adjusting balance of labor supply and demand. In some markets, an inflow of employers can cause wages to spike. In others, population outflows can create the same effect. In this deep dive, we expand on the data findings from the 2024 Top Markets for Multifamily Investment Report, exploring the unique conditions driving metro wage growth trends.

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Press Contact If you are a member of the media and would like to arrange an interview with one of our knowledgeable multifamily and commercial real estate finance executives or if you have general media questions about Arbor, please contact us at [email protected] or through the below form.   Fill out the form to reach our press team.  

Current Reports

Top Markets for Multifamily Investment Report 2024

With interest rate pressure easing, quality multifamily investment opportunities have emerged from coast to coast, making identifying the optimal location essential. A roadmap for investors, Top Markets for Multifamily Investment Report 2024, developed in partnership with Chandan Economics, ranks the top 50 metropolitan markets found through an analysis of 10 key factors, including affordability, population growth, and climate risk.

Articles

The Value of a Top Freddie Mac Small Balance Loans Lender

Small multifamily properties play a crucial role in providing affordable and market-rate rental housing across the country. But Arbor and Freddie Mac understood that financing in this sector had historically been fragmented when we partnered to create the Small Balance Loan (SBL) program in 2014. As the program celebrates its 10th anniversary in 2024, Arbor is proud to have helped pioneer the product to meet a critical need for our borrowers. A six-time Top Small Balance Loans Lender, Arbor has the right experience to expertly customize loan products and align your asset’s long-term goals with your community’s needs.

General: 800.ARBOR.10

Home | Freddie Mac | Student Housing Value-Add Loan
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FREDDIE MAC®

Student Housing Value-Add Loan

Arbor’s Student Housing product provides attractive terms and competitive prices for the purchase or refinance of properties that, because of construction and location, specifically cater to a student tenant base and may or may not be readily convertible to conventional multifamily housing.

  • Offers short-term, negotiable financing for upgrades of $10,000 to $25,000 per unit
  • Allows for a wide variation in borrower term and structure needs
  • Up to 50% of funds may be spent on unit interiors
  • Up to 75% of funds can be spent on exteriors
  • Budget can be adjusted up to 20% without additional approval
  • Interest-only and uncapped floating-rate loan
  • Eligible mixed-use properties are supported

Eligible Borrowers
  • Experienced borrowers who have successfully demonstrated expertise with comparable student deals.
  • 1.5x the standard minimum net worth and liquidity requirements for guarantors
Eligible Property Types
  • Properties with no more than 250 total units or 625 beds
  • Well-constructed properties requiring modest repairs
  • Market laggards that require capital infusion and new/improved management
  • Real-estate owned properties in receivership that are capable of improved performance
School Size 15,000 student enrollment minimum; this standard is greater than the student housing policy minimum of 8,000; properties must be within 2 miles of campus and have convenient access to campus by either public transit, shuttle or pedestrian access
Terms
  • Three years with one 12-month extension based on the borrower’s request and one optional 12-month extension based on Freddie Mac’s discretion
  • Floating-rate loan with full-term interest-only; no cap required
  • No lock out; borrower may pay off the loan at any time but must remit an exit fee of 1%; the exit fee will be waived if the loan is refinanced with Freddie Mac
  • Acquisitions and refinances; not assumable
  • Loan documentation at origination will include the Value-Add Rider, which will detail the terms/requirements of the rehabilitation
  • Required Escrows will include taxes, insurance, replacement reserves and Priority Repairs. A three-month debt service escrow is required for all transactions during the renovation phase. Upon completion of 40% of the renovation work and subject to DSCR requirement, 50% of the escrow may be released. Upon completion of 80% of the renovation work and subject to DSCR requirement, the remaining amount of escrow may be released. In addition to the completion requirements, the DSCR must be 1.25x or higher to qualify for release of escrow
  • For longer term ownership, cash-out is available provided a completion guaranty on budgeted improvements in an amount at least equal to the cash-out in place
Amount
  • Maximum loan-to-purchase/loan-to-value (LTV) ratio: 85%
  • Minimum amortizing debt service coverage ratio (DSCR): 1.20x
  • Sizing based on a 7-year sizing note rate
  • Appraisal must include as-is and as-stabilized values; underwriting must support a 1.35x DSCR and 75% LTV based on as-stabilized value supported by the appraisal
  • Standard Freddie Mac underwriting based on as-is income and expense
  • Refinance Test not required
  • No pro-forma underwriting of future performance
Rehabilitation
  • Rehabilitation must commence within 90 days of loan origination and be completed within 33 months
  • A scope of work is required; budget may range from $10,000-$25,000 per unit or $4,000-$10,000 per bed; the budget must allocate at least 25% to interior improvements
  • Budget can be adjusted by as much as 20% without additional approval; up to 50% of the budget may be spent on unit interiors
  • Completion Guaranty or rehabilitation escrow required; subject to Freddie Mac discretion
  • Borrower/Servicer reporting required.
At Loan Maturity/Refinance
  • Final engineer review of work completion and quality is required.
  • Refinance with Freddie Mac with no exit fee; otherwise 1% applies.
  • Freddie Mac will re-underwrite the loan to then current property performance.
  • One-year borrower extension option is available for a 0.5% extension fee, assuming no event of default
  • Additional Freddie Mac extension option is available, at Freddie Mac’s discretion, thereafter with a 1% extension fee
Fees Standard fees apply, including application fee and good faith deposit

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