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Freddie Mac Direct Purchase of Tax-Exempt Loans

Freddie Mac Direct Purchase of Tax-Exempt Loans

This program provides a cost-effective alternative to tax exempt bond credit enhancements with 4% low-income housing tax credits. This program also requires less documents and less participants than bond loans. This can reduce the cost of issuance up to 40%.

Value-Add Loan Options and Requirements
Loan Terms
  • 2.5 years; interest-only
  • Floating-rate; no cap needed
  • No prepayment during the first year
  • After the first year, borrower may pay off the loan at any time but must remit an exit fee of 2%; the exit fee will be waived if the loan is refinanced with a Freddie Mac fixed- or floating-rate securitized loan
  • Acquisitions only; not assumable
  • Loan documentation at origination will include the Value-Add Rider which will detail the terms/requirements of the rehabilitation
  • Escrows will include real estate taxes, insurance, and replacement reserves; escrows for rehabilitation are not required
Property Types
  • Must have more than 500 units. Tier 5 MSA or better markets.
  • Well-constructed properties requiring moderate repair
  • Market laggards that require capital infusion and new/improved management
  • REO properties in receivership that are capable of improved performance
  • Not eligible: seniors housing, student housing, manufactured housing, affordable housing
Loan Proceeds/Sizing
  • Max LTV of 80%
  • Debt service coverage ratio (DCR) based on 7-year fixed rate at current pricing and Treasury rate
  • Standard Freddie Mac underwriting based on as-is income and expense
  • Refinance Test not required at initial sizing
  • No pro-forma underwriting of future performance
Rehabilitation
  • Rehabilitation must commence within 90 days of loan origination
  • Budget should be no less than $5,000 per unit and no more than $15,000 per unit; increase in the budget will be reviewed on a case by case basis
  • At least 50% of the plan/budget should be spend directly on unit upgrades
  • Increases or decreases to the plan/budget less than or equal to 20 percent do not require notice to or approval by Freddie Mac; increases or decreases greater than 20 percent require notice to Freddie Mac; increases or decreases that go above $15,000 per unit or below $5,000 per unit require notice to and approval by Freddie Mac
  • Rehabilitation term should not exceed 27 months
  • Tenants will typically stay in place during the rehab; minimal disruption to property occupancy is expected
  • Minimum break-even occupancy calculated at origination based on the applicable 7- year fixed-rate
  • Servicer to provide standard performance/financial reporting and conduct annual inspections of rehab progress
  • Borrower to provide quarterly attestation/certification of rehabilitation progress
  • Guarantor to guaranty the lien-free completion of any work commenced in the manner required by the loan documents
At Loan Maturity/Refinance Final engineer review of work completion and quality is required Freddie Mac will re-underwrite the loan (akin to any loan maturity) according to then-current credit policy parameters

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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Fernando and Leanne are Amazing

Fernando and Leanne are amazing. I had many small businesses that need refinancing over the years. I have met many Brokers and there is always a catch. ALWAYS!… Use them! Once you do you will work with them forever

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She Took Care of All My Needs

If you searching for a great experience Commercial Loan Direct is the place. Leanne took care of me and honestly had the greatest experience. She handled all of my needs in a smooth and timely manner listened and addressed any concerns I had about the process and was very patient. I can be quite a handful at times and Leanne was so professional and kind hearted. I'd 100% recommend this company. Thank you again.

- Vincent Arias

Commercial Loan Direct Streamlined the Whole Process

We were in unfamiliar territory when it came to refinancing. Commercial Loan Direct streamlined the whole process for us. Leann connected us with lenders that were the right fit for us. The money and time we saved was so worth it. I highly recommend them

- Rita Pisarski