Terms:  

• Fixed-rate: 5, 7, 10, or 15-year loans

• Floating-rate: 5, 7, or 10-year loans

• Partial interest-only terms available

• Full term interest-only terms available in certain circumstances

Amortization:  30 years

Maximum LTV/Minimum DSCR: 

• Top Market: 80% Max. LTV/1.20x Min. DSCR

• Standard Market: 80% Max. LTV/1.25x Min. DSCR

• Small Markets: 75% Max. LTV/1.30x Min. DSCR

• Very Small Markets: 70% Max. LTV/1.35x Min. DSCR

Full Term Interest-Only LTV/DSCR Adjustments: 

• Top and Standard Markets: 70% Max. LTV/Add 0.15x to Min. DSCR

• Small Markets: 65% Max. LTV/Add 0.15x to Min. DSCR

• Very Small Markets: 60% Max. LTV/Add 0.15x to Min. DSCR

Eligible Borrowing Entities: 

• Loans under $6 million:

  • Single Asset Entities (SAEs)

  • Special Purpose Entities (SPEs)

  • Irrevocable Trusts

• Loans above $6 million:

  • Special Purpose Entities (SPEs)

  • SAEs (with additional restrictions)

Eligible Borrowers:  Must have experience operating a Targeted Affordable Housing (TAH) property

Eligible Properties: 

Eligible property types include ncapped multifamily stabilized properties with one or more of the following affordable characteristics:

• LIHTC properties in year 11 or later of their compliance period

• Properties with Regulatory Agreements that impose rent or income restrictions

• Properties with long-term Housing Assistance Payment (HAP) Contracts

• Properties with Tax Abatements

• Section 8 Voucher properties

*Properties located in Small and Very Small Markets may have additional requirements

Ineligible Properties: 

• Seniors housing (AL, IL, ALC, SN) with resident services, including:

  • Assisted Living (AL)

  • Independent Living (IL)

  • Alzheimer's Care (ALC)

  • Skilled Nursing (SN)

• Student housing (greater than 50% concentration)

• Military housing (greater than 50% concentration)

• LIHTC properties with Land Use Restrictive Agreements (LURAs) in compliance years 1 through 11

• Historic Tax Credit (HTC) properties with a master lease structure

• Rehabilitation financing

• Tax-exempt financing

Recourse:  Non-recourse with standard “bad boy” carve-outs

Prepayment Penalty:  

• Fixed-Rate Loans: Defeasance, declining prepayment schedules, and yield maintenance options available

• Floating-Rate Loans: 1-year lockout followed by 1% or declining schedule

• Declining Schedule: Based on loan term:

  • 5 year: 5%, 4%, 3%, 2%, 1%

  • 7 year: 5%, 5%, 4%, 4%, 3%, 2%, 1%

  • 10 year: 5%, 5%, 4%, 4%, 3%, 3%, 2%, 2%, 1%, 1%

  • 15 year: 5%, 5%, 5%, 4%, 4%, 4%, 3%, 3%, 3%, 2%, 2%, 2%, 1%, 1%, 1%

Net Worth/Liquidity Requirements: 

• Net Worth: Equal to loan amount

• Liquidity: Equal to 9 months of principal and interest

Occupancy Requirements: 

• 90% average for 3 months before underwriting

• 85% average for 3 months before underwriting for properties with one or more of the following characteristics:

  • Property in a top market, and has been recently built or renovated

  • Property has more than 30 units

  • Or, has all of the following:

    • No history of serious crime

    • Newer, better management taking over

    • Appraised rents/occupancy higher than current rents/occupancy

    • No volatile historical occupancy swings

Subordinate Debt:  Permitted under certain circumstances. Approved lenders include governmental entities, Community Development Financial Institutions (CDFIs) and nonprofits.

Advantages:

• Variety off fixed-rate, floating-rate, and interest-only options available

• Full-term interest only also available

• Up to 80% LTV allowance

• Streamlined underwriting process

• Less documentation required

Disadvantages:

• Application fee of $3,000 or 0.1% of the loan amount (whichever is greater) required

• Replacement reserves required for most properties, based on a Property Needs Assessment (PNA) rating:

  • Above average properties: $250/unit per year

  • Average properties: $300/unit per year

  • Below average properties: $350/unit per year

*Replacement reserve escrow deferred for above average rated properties

In this article:
1. Freddie Mac Targeted Affordable Housing (TAH) Express Financing
2. Sample Freddie Mac Terms for TAH Express Financing in 2024
3. Get Financing