FANNIE MAE DUS®
Tax-Exempt Bond Credit Enhancement
BENEFITS
- Low borrowing cost, “AA+” rating keeps the interest rates on bonds low.
- Supports affordable rental housing stock.
- Flexible structures.
- Certainty and speed of execution.
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ELIGIBILITY
- Multifamily Affordable Housing (MAH) properties with 4% Low-Income Housing Tax Credit (LIHTC) rent restrictions.
- New money issues, refundings, or credit substitutions.
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TERM
10 – 30 years (minimum 15 years for new construction and substantial rehabilitation).
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AMORTIZATION
Up to 35 years.
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INTEREST RATE
Fixed-rate.
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MAXIMUM LTV
- 90% for 4% LIHTC properties with at least 90% of the units meeting affordability requirements.
- 85% for 4% LIHTC properties with less than 90% of the units meeting affordability requirements.
- 80% for refundings.
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MINIMUM DSCR
- 1.15x for 4% LIHTC properties with at least 90% of the units meeting affordability requirements.
- 1.20x for 4% LIHTC properties with less than 90% of the units meeting affordability requirements and for refundings.
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PREPAYMENT AVAILABILITY
Flexible prepayment options available.
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THIRD-PARTY SUBORDINATE FINANCING
Hard subordinate debt (which requires scheduled repayment of principal) is permitted only if provided by a public, quasi-public, or not-for-profit lender and combined debt service coverage cannot fall below 1.05x. Soft subordinate debt is permitted subject to requirements which include capping payments at 75% of available Property cash flow after payment of senior liens and Property operating expenses.
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RECOURSE
Non-recourse execution is available with standard carve-outs for “bad acts” such as fraud and bankruptcy.
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ESCROWS
Replacement reserve, tax, and insurance escrows are typically required.
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THIRD PARTY REPORTS
Standard third-party reports required, including Appraisal, Phase I Environmental Site Assessment, and Property Condition Assessment.
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ADDITIONAL CONSIDERATIONS
The Credit Enhancement Instrument issued by Fannie Mae is provided in accordance with the terms of a Reimbursement Agreement between the borrower and Fannie Mae, among other documents.
