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Freddie Mac Single-Family Rental (SFR) Pilot Program

Freddie Mac Single-Family Rental (SFR) Pilot Program

Seeing the need for a product that can provide a financing option for single family rental home portfolios, Freddie Mac is testing out a new loan product called the Single-Family Rental Pilot Program. Since nearly 40% of renters lease single-family residences (i.e. structures with 1-4 units), Freddie wanted to provide a source of financing for owners of affordable single family rental homes that have exceeded the threshold of individual home loan allowances.

Loan Features/Characteristics
Recourse Non-recourse, except standard “bad boy” carve-outs
Prepayment Penalty Yield Maintenance or Step-Down
Loan Servicer Minimum of 0.25%, based on loan size
Application Fee 0.10% of loan amount
Reserves Taxes, insurance, and HOA
Capital Reserves Required
Due Diligence All 3rd party due diligence reports must be from Freddie’s approved vendor list.
Property Requirements
Property Type SFRs (1-4 units) with permanent C/Os; (no MFH, condos, or co-ops)
Affordability 75% of SFRs must have affordable rents or are at 80% or below of AMI; waivers considered for mission-based or nonprofit strategies. Loans where only 51%+ of SFRs are affordable at 80% AMI or below, will be considered on an exemption basis.
Location Nationwide, but each MSA in a loan portfolio must have at 5+ homes
Loan Amount $5,000,000 minimum
Financials Operating Statement and Rent Roll required quarterly
Management 3rd party manager required (or company affiliated with Borrower with contract in place); replacement manager needs pre-approval from Lender.
Valuation Recent appraisals (within 6 months) must account for a minimum of 30% of the SFRs, with at least 15 appraisals. Valuations for the remaining homes are determined at Freddie Mac’s discretion.
Collateral All properties will be cross-collateralized and 100% of Borrower interest in the holding SPE will also be pledged.
Release Standard release provisions, including 115% payment and applicable prepayment premiums.
Borrower Requirements
Structure Single Purpose Entity (SPE) that owns at least 50 SFR homes
Experience At least 5 years experience of owning and managing required
Underwriting Requirements
Term Length 5, 7, or 10 years
Max LTV/LTC 70% (5 yr), 75% (7-10 yr) OR 80% (including rehabilitation costs)
Max Amortization 30 years
Min DSCR 1.30x (5-7 yr), 1.25x (10 yr)
Interest Rate Fixed

Program Plus Freddie Mac Loans

Program Plus Options
Fixed Rate Loans Floating Rate Loans
Lease-Up Loans Manufactured Housing Community Loans
Revolving Credit Facility Student Housing Loans
Supplemental Loans Value-Add Loans

Affordable Housing Freddie Mac Loans

Affordable Housing Options
9% LIHTC Cash Loans Bond Credit Enhancement with 4% LIHTC
Bond Credit Enhancement with Other Affordability Components Cash Loan with Other Affordability Components
Direct Purchase of Tax-Exempt Mortgages Preservation Rehabilitation Financing
Supplemental Loans Tax-Exempt Bond Securitization (TEBS)
Variable Liquidity Pricing

Other Freddie Mac Loans

Other Freddie Loan Types
Student Housing Loans Small Balance Loans
Freddie Mac Single-Family Rental (SFR) Pilot Program

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