Freddie Mac Tax-Exempt Loans
Freddie Mac Tax-Exempt Loans are designed for the purchase, refinancing, or renovation of Targeted Affordable Housing (TAH) properties with 4% LIHTC credits, have LTVs up to 90% of property market value and DSCRs as low as 1.15x.
Freddie Mac Tax-Exempt Loans for Affordable Housing Developments
If you're considering purchasing, refinancing or renovating an affordable housing property with 4% Low-Income Housing Tax Credits (LIHTCs), a Freddie Mac Tax-Exempt Loan could be a fantastic option.
Freddie Mac Tax-Exempt Loans offer fixed-rate terms of up to 30 years and floating-rate terms of up to 10 years, as well as both interest-only and float-to-fixed rate loan options. Plus, these loans offer maximum LTV allowances of up to 90% of a property's market value and DSCRs as low as 1.15x for fixed-rate financing, and LTVs of up to 85% and DSCRs as low as 1.20x for floating-rate loans.
Freddie Mac Tax-Exempt Loans also support eligible mixed-use properties and permit subordinate financing, making them an incredibly flexible tool for affordable property developers and investors.
To learn more, check out Freddie Mac’s official Tax-Exempt Loans Product Sheet or keep reading below for an in-depth explanation of the Freddie Mac Tax-Exempt Loan program.
Sample Freddie Mac Terms for Tax-Exempt Loans in 2024
Size: Varies based on LTV and DSCR requirements.
Use: Financing for the acquisition or refinance of stabilized affordable multifamily properties with 4% Low-Income Housing Tax Credits (LIHTC) with at least 7 years remaining in the LIHTC compliance period.
Terms:
Fixed-rate, floating-rate, and fixed-to-floating rate options, minimum loan term is typically 7 years. Maximum terms include:
Fixed-rate loans: Up to 30 years
Floating-rate loans: Up to 10 years
Construction loans: Up to 36-months
Fixed-rate loans: Priced on a spread to 10-year Treasuries
Floating-rate loans: Based on 30-day SIFMA or 1-month LIBOR index
Fixed-rate loans: 85% of adjusted value or 90% of market value
Floating-rate loans: 80% of adjusted value or 85% of market value with interest rate hedge
Avoids the risk and hassle of bond issuing
Interest-only loan options
Eligible mixed-use properties supported
Immediately funding and forwards
Subordinate financing allowed
Fixed, floating, and float-to-fixed rate options
Freddie Mac GAP financing may be available
Rate locks available after commitment (early rate locks may also be available)
Appraisal, Phase I Environmental Report, Physical Needs Assessment, Zoning, and Moisture Management reports are required; a Seismic Report may be required for properties in Seismic Zones 3 and 4
Application fees, commitment fees, and other fees required
Replacement reserves required
No supplemental loans allowed
2% rate lock fee typically required (refunded after property reaches stabilization)
Freddie Mac fee of $2,000 or 0.1% of loan amount (whichever is larger) also typically required
Interest Rate:
Amortization: Up to 35 years
Maximum LTV:
Minimum DSCR: 1.15x for fixed rate, 1.20 for floating-rate, with interest rate hedge
Prepayment Penalty: Minimum 10 years prepayment protection, then typically yield maintenance
Subordinate Loans: Permitted, supplemental financing not available
Timing: Loans typically take between 75 and 90 days to close, with some lenders closing in as little as 30 days
Assumability: Loans are assumable with lender approval and a 1% fee
Advantages:
Disadvantages: