Fannie Mae MBS as Tax-Exempt Bond Collateral (MTEB)
A Fannie Mae MBS used as collateral behind a tax-exempt bond issue. The 90% affordability threshold is the single largest lever on the whole structure.
A Guaranteed Passthrough Behind a Bond Issue
MTEB stands for MBS as Tax-Exempt Bond Collateral. A Fannie Mae multifamily mortgage-backed security is used as collateral to credit enhance either an existing fixed-rate bond refunding or a new fixed-rate bond issue paired with 4% Low-Income Housing Tax Credits.
The reason bond buyers like it is specific. Fannie's guaranteed direct passthrough of principal and interest is more attractive to bondholders than most alternative enhancements, and that shows up as a lower coupon on the bonds, which is money in the deal's pocket.
| Term | 10 to 30 years |
|---|---|
| Amortization | Up to 35 years |
| Maximum LTV | 90% for 4% LIHTC properties with at least 90% of units meeting affordability requirements; 85% if fewer than 90% of units qualify; 80% for refundings |
| Minimum DSCR | 1.15x for 4% LIHTC properties with at least 90% of units qualifying; 1.20x for properties below that threshold and for refundings |
| Eligibility | Multifamily Affordable Housing properties, underwritten to Fannie Guide requirements for tax-exempt bonds. Refundings or new issues with in-place rehabilitation |
| Delivery | Immediate delivery or standby forward commitment |
| Interest only | Available |
| Prepayment | Declining prepayment options or yield maintenance |
| Issuer and trustee fees | Must be underwritten into loan sizing, but are paid directly by the borrower and are not enhanced or passed through by Fannie Mae |
| Redemption | No separate mandatory or optional redemptions outside the MBS structure |
| Loan documents | Fannie Mae loan documents; the issuer must use the Fannie Mae form indenture |
| Recourse | Non-recourse with standard carve-outs for bad acts such as fraud and bankruptcy |
Terms confirmed against the Fannie Mae MBS as Tax-Exempt Bond Collateral (MTEB) Fixed Rate term sheet at multifamily.fanniemae.com/financing-options/affordable-loans/mbs-tax-exempt-bond-collateral-mteb-fixed-rate, fetched July 31, 2026.
Why Does the 90% Affordability Threshold Change Everything?
It is the largest single lever on this page. Get 90% or more of units meeting affordability requirements and you underwrite at 90% LTV and 1.15x. Fall below it and you drop to 85% and 1.20x. On a $30,000,000 valuation, that is roughly $1,500,000 of proceeds plus the coverage penalty on top.
If your unit mix is sitting at 87% qualifying, it is worth modeling what it costs to restrict three more units. The answer is often less than the proceeds you gain.
What Do the Issuer and Trustee Fees Do to Sizing?
They have to be underwritten into the loan even though Fannie neither enhances nor passes them through. The borrower pays them directly, and they still consume debt capacity. Sponsors coming from conventional lending routinely miss this and find their proceeds several hundred thousand dollars short of the model.
Get the issuer's fee schedule before you build the sources and uses, not after.
The Conversion Feature
If there is a single bondholder, and subject to issuer consent, that bondholder may redeem the tax-exempt bonds and hold the MBS directly. For 4% LIHTC transactions the redemption cannot occur before the placed-in-service date.
That option matters to the buy side and it is worth understanding on the sell side too, because it changes who your long-term counterparty is. A single-bondholder structure that converts leaves you facing an MBS investor rather than a bond trustee.
How Does Subordinate Debt Work Here?
The same way it works across Fannie's affordable menu. Hard subordinate debt requiring scheduled principal repayment is permitted only from a public, quasi-public, or not-for-profit lender, and combined coverage cannot fall below 1.05x. Soft subordinate debt is permitted subject to conditions including a cap on payments at 75% of available property cash flow after senior liens and operating expenses.
MTEB or Credit Enhancement?
MTEB uses an MBS as the collateral and closes through Fannie's delegated model, which Fannie names as the source of faster closings. Tax-Exempt Bond Credit Enhancement is the alternative structure. Freddie Mac's parallel offering is Bond Credit Enhancement with 4% LIHTC, at 85% of adjusted value or 90% of market value and 1.15x on fixed rate, covered on our Freddie LIHTC page.
For deals that do not need bonds at all, compare against affordable housing preservation and FHA risk sharing, which reaches 90% LTV without a bond issue.
Send us the allocation, the unit mix against the affordability tests, and the issuer's fee schedule. We will size all four executions.
Start here
Get a quote on your deal.
Tell us about the property. We respond with sizing, likely executions, and indicative terms. No cost, no obligation.
Prefer to talk? (561) 556-5777