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Freddie Mac LIHTC Enhancement
The Freddie Mac LIHTC Enhancement protects LIHTC investors by providing make-whole payments if a foreclosure occurs. Eligible properties include those financed with Freddie Mac Bond Credit Enhancements, Freddie Mac Tax-Exempt Loans (TELs), or Freddie TAH Cash Loans.
Freddie Mac Low-Income Housing Tax Credit Enhancement
If you're an LIHTC investor for an affordable property that's being financed with a Freddie Mac Bond Credit Enhancement, a Freddie Mac Tax-Exempt Loan (TEL), or a Freddie Mac TAH Cash Loan, and are looking for an added degree of financial security, Freddie Mac's LIHTC Enhancement program could be a fantastic choice.
The LIHTC Enhancement program protects LIHTC investors in the case of foreclosure by providing a make-whole payment based on the investor's initial contribution, in exchange for paying a quarterly fee to Freddie Mac. LIHTC Enhancements are available for financially strong borrowers with significant experience in 80/20 (i.e. 80% market-rate, 20% affordable) or other types of mixed-income properties, and last for a term of 10 years.
To learn more, check out Freddie Mac’s official LIHTC Enhancement Product Sheet or keep reading below for an in-depth explanation of the Freddie Mac LIHTC Enhancement program.
Sample Freddie Mac Terms for LIHTC Enhancement in 2024
Size: Varies based on LTV and DSCR requirements.
Use/Purpose:
LIHTC Enhancements protect LIHTC investors in the case of foreclosure, which is available for properties funded with Freddie Mac financing including Bond Credit Enhancement, Tax-Exempt Loans (TELs), or TAH Cash Loans.
If Freddie Mac forecloses on a loan with LIHTC Enhancement, the investor will receive a make-whole payment equal to the amount of their initial investment, but not including the amount of their tax credit.
Freddie Mac must be paid a fee for the LIHTC Enhancement
- Protects LIHTC investors in the case of foreclosure
Requires quarterly fees based on risk
Additional documentation is typically required, including annual K-1s (documents reporting every shareholder's share of income, losses, deductions and credits) and reports documenting the property's performance and compliance with the LIHTC agreement
Term: 10 years
Maximum LTV/Minimum DSCR: Based on the requirements for the Senior Loan (either Bond Credit Enhancement, Tax-Exempt Loans (TELs), or TAH Cash Loans)
Eligible Properties: Newly developed and stabilized high-rise and mid-rise mixed-income properties, 80/20s, or similar projects
Eligible Borrowers: Financially strong 80/20 developers with significant experience in the applicable market
Occupancy Requirement: The property must be fully stabilized with qualified low-income tenants
Advantages:
Disadvantages: