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Fannie Mae Moderate Rehabilitation Supplemental Loans for Affordable Properties
These Fannie Mae-insured loans offer longer amortizations, higher LTV allowances of up to 90%, and lower minimum DSCR requirements.
Fannie Mae-Insured Supplemental Loans for Moderately Rehabilitated Multifamily Affordable Housing (MAH) Developments
Properties that have recently finished a moderate rehabilitation with a Fannie Mae loan often need a new source of funds — but financing that works well for conventional properties isn't always ideal for affordable housing developments. That's why Fannie Mae created a Moderate Rehabilitation (Mod Rehab) Supplemental Mortgage Loan for Affordable Properties, designed specifically for the needs of Fannie Mae financed Multifamily Affordable Housing (MAH) properties.
In comparison to conventional Fannie Mae Moderate Rehab Supplemental Loans, these loans offer longer amortizations, higher LTV allowances (up to 90% in certain cases), and lower minimum DSCR requirements. Plus, these loans are fully assumable with lender approval.
Sample Terms for Moderate Rehabiliation Supplemental Loans for Affordable Properties in 2024
Size: Varies
Terms: 5-30 years, must end at the same time as the original mortgage loan
Amortization: Up to 35 years
Interest Rates: Fixed and variable-rate loan options available
Maximum LTV: LTV of up to 85% (varies based on specific property type, and may be up to 90% for earn-outs and other, specific situations)
Minimum DSCR: As low as 1.15x (depending on specific property type)
Recourse: Loans are non-recourse with standard “bad boy” carve-outs
Rehab Requirements: Property improvements must average at least $8,000/unit, and at least 60% of the budget should be allocated to improving interior units
Eligible Properties:
Must already have a original Fannie Mae mortgage for moderate rehabilitation
Fannie Mae must be the only debt-holder on the property
Lender must be servicer of the original Fannie Mae mortgage loan
Fast underwriting and approval process
Competitive interest rates
Loans are non-recourse
30-180 day rate locks (streamlined rate locks also available)
Lower cost than refinancing
Not subjected to Fannie Mae's "one supplemental loan" rule
No waiting period, can be originated within 36 months of the original moderate rehabilitation loan
Requires third-party reports including a property condition assessment and a Phase I Environmental Assessment (may not be required in certain circumstances)
Fannie Mae must be the only debt-holder on the property
Advantages
Disadvantages
Case Study: Rehabbing a Louisville Complex
Let's consider the case of Brenda, a property investor in Louisville, Kentucky, who specializes in the acquisition and rehabilitation of affordable multifamily housing properties. She had recently completed a moderate rehabilitation project on one of her properties using a Fannie Mae loan. Brenda had successfully renovated the interior units of her property, with 60% of her budget spent on these improvements. However, she was now in need of additional funds for further development and enhancements.
Understanding that affordable housing developments have specific financial needs, Brenda turned to Fannie Mae's Moderate Rehabilitation (Mod Rehab) Supplemental Mortgage Loan for Affordable Properties. This program seemed like a perfect fit for her situation as it was designed explicitly for properties like hers, which had undergone moderate rehabilitation under a Fannie Mae loan.
Brenda's property was valued at $8 million, and she had already made significant improvements averaging over $8,000 per unit. With the Fannie Mae Mod Rehab Supplemental loan offering a maximum LTV of up to 85% for properties like hers, Brenda was able to secure an additional loan amount of $6.8 million to fund her ongoing development needs.
The loan program's term of up to 30 years aligned with the term of Brenda's original Fannie Mae loan, and the extended amortization period of up to 35 years provided Brenda with the benefit of lower monthly payments. The loan also offered both fixed and variable interest rate options, giving Brenda the flexibility to choose the best fit for her financial situation.
One standout feature of this loan program that attracted Brenda was its non-recourse nature, protecting her personal assets from being used to repay the loan if she defaulted. This loan also allowed her to lock in her interest rate for anywhere between 30 to 180 days, providing some protection from interest rate fluctuations during the loan process.
By availing the Fannie Mae Mod Rehab Supplemental loan, Brenda was able to secure the necessary funds to continue improving her affordable multifamily property, creating a more appealing living environment for her tenants while enhancing her property's value.
This is a fictional case study provided for illustrative purposes.