Articles

Government Shutdown: What Multifamily Borrowers Need to Know

Unless an 11th-hour agreement is reached, a Congressional impasse will trigger the first partial U.S. government shutdown in four years. Starting October 1, 2023, many non-essential federal government operations will be limited or suspended. Agency lending, however, will not be interrupted, and there is no cause for concern. Borrowers should anticipate some inconveniences, such as processing and closing delays.

Articles

Understanding the Impact of Wildfires on Rental Property Insurance

From California to Maui, the frequency and scope of wildfire events are rising, causing insurance markets and public agencies to reevaluate property in areas at risk for catastrophic damage. As a result, rental housing providers are seeing greater limitations to coverage, higher premium prices, and, in some cases, a total absence of viable private insurance — a trend detailed in the NMHC 2023 State of Multifamily Risk Survey and Report. This troubling new trend has placed many rental housing operators in a bind where they must simultaneously contend with the declining availability and affordability of insurance options.

Articles

Five Advantages of FHA Multifamily Construction Loans

In the last three years, multifamily construction has reached levels not seen since the 1980s, supported, in part, by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) loans. If you are exploring the acquisition, refinancing, rehabilitation, or new construction of conventional multifamily, affordable housing, seniors housing, or a healthcare facility, consider FHA multifamily construction loans, a stable financing option with excellent terms and many other attractive advantages.

Articles

Where are Single-Family Rental (SFR) Rents Rising the Fastest?

While the single-family rental (SFR) sector’s rent growth averages have retreated from record highs, structural tailwinds are keeping price growth positive — both nationally and in major SFR markets. In this research brief, Chandan Economics and Arbor Realty Trust analyze DBRS Morningstar data, which covers the top 20 MSAs by SFR activity, to discover the metropolitan areas where SFR rent growth is the hottest right now.

Articles

Fannie Mae Small Loans Cap Raised to $9 Million

Fannie Mae recently announced that its Small Loan cap has increased from $6 million to $9 million for all loans committed as of August 22, 2023. Multifamily borrowers and lenders have praised the change to the Fannie Mae Small Loans program, which will encourage greater investment in a rapidly growing sector where demand remains high despite market volatility.

Articles

The Top Five Emerging Metros for Retiree Relocation

As Baby Boomers reach retirement age, their evolving geographic preferences are strengthening housing markets and local economies in new locations, which feature attractive climates, relative affordability, and ample outdoor activities. With swelling populations of senior citizens, our top five emerging metropolitan areas for retiree relocation are fertile ground for multifamily real estate investment.

GENERAL: 800.ARBOR.10

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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