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Fannie Mae Multifamily Near-Stabilization Execution Loans
Fannie Mae near-stabilization execution loans can be a great option for recently constructed or newly renovated multifamily properties.
If you're an investor who owns a newly constructed or recently renovated property that's expected to achieve stabilized occupancy within 120 days, a Fannie Mae Multifamily Near-Stabilization Execution Loan could be a great choice.
Starting at a minimum of $10 million, Near-Stabilization Execution Loans are an effective loan option for investors with properties that are currently being financed with a short-term construction or renovation loans, and want to switch to a permanent financing option.
Fannie Mae Near-Stabilization Execution Loans loans offer a maximum LTV of up to 75% and fixed and variable-rate terms of between 5 and 12 years, with amortizations of between 5 and 30 years. Like many other Fannie Mae multifamily loans, these loans offer competitive interest rates and are non-recourse. Plus, Near-Stabilization Execution Loans are fully assumable (with lender approval and a 1% fee) and are available for both affordable and market-rate properties.
To learn more, check out our official Fannie Mae Near-Stabilization Execution Product Sheet or keep reading below for an in-depth explanation of the Near-Stabilization financing program.
Sample Fannie Mae Terms for Near-Stabilization Execution Loans in 2024
Size: $10 million minimum
Terms: 5, 7, 10, and 12 year fixed and variable-rate loan terms available
Amortization: Five to 30 years, after 12-month interest-only loan period. Interest-only loan period may be extended in some circumstances.
Maximum LTV: Up to 75% for conventional properties, up to 90% LTV/LTC for affordable properties
Minimum DSCR: Targeted DSCR of 1.25x, or targeted DSCR of 1.15x for multifamily affordable housing (MAH) properties (targeted DSCR being the DSCR deemed possible with 4 months of rate lock, as determined by Fannie Mae and the lender)
Recourse: Loans are non-recourse with standard “bad boy” carve-outs for fraud and other bad acts
Prepayment Options: Yield maintenance or declining prepayment premiums
Occupancy Requirement: 75% physical occupancy, 60% economic occupancy
Eligible Borrowers
Borrowers should be in a strong financial position and have experience with successful lease-ups in the past. Single Asset Entities are preferred by many lenders, but may or may not be required.
Eligible Properties
Conventional and Multifamily Affordable Housing (MAH) developments
Partially leased, recently built, or newly renovated properties
Competitive interest rates
Loans are non-recourse
30- to 180-day rate locks available after commitment (streamlined rate locks also available)
Supplemental financing allowed after 12 months
Loans are fully assumable with lender approval and 1% fee
Requires third-party reports including an Appraisal, Property Condition Assessment, and a Phase I Environmental Assessment
Requires a $12,500 application deposit and a $3,000 processing fee
Requires a 1% origination fee
Good faith deposit of 2% required at rate lock, which is refundable after closing
Advantages
Disadvantages
Case Study: Stabilizing a Phoenix Development
In the bustling city of Phoenix, Arizona, a seasoned real estate investor named Emma had recently completed the construction of a high-end 75-unit multifamily apartment complex. Emma had initially financed the construction of this project with a short-term construction loan.
Once the construction was completed, Emma faced a challenge. Although the property was attracting interest from potential tenants, it was yet to reach stabilized occupancy. The construction loan's term was nearing its end, and Emma needed a financing solution that could bridge the gap to stabilization while providing long-term financing.
Emma discovered the Fannie Mae Multifamily Near-Stabilization Execution Loan, a product perfectly suited to her situation. This type of loan was designed for properties expected to achieve stabilized occupancy within 120 days, just like Emma's project.
Given the high-end nature of her property and the local rental rates, the project had a current market value of approximately $22.5 million. Emma applied for a Near-Stabilization Execution Loan of $16 million, which accounted for a loan-to-value (LTV) ratio of approximately 71%, comfortably within the maximum LTV of 75% for this type of loan.
Despite the challenges of achieving stabilized occupancy, Emma's strong track record, robust financial position, and the property's potential attracted favorable reviews of her application. She was able to secure the loan, providing her with the financial support needed during the crucial period of lease-up and stabilization.
In due course, Emma successfully achieved stabilized occupancy, and her high-end apartment complex became a sought-after living destination in Phoenix. This case demonstrated the potential and flexibility of the Fannie Mae Multifamily Near-Stabilization Execution Loan for newly constructed or recently renovated properties on the verge of stabilization.
This is a fictional case study provided for illustrative purposes.