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Download Term Sheet
FREDDIE MAC OPTIGO®
Impact Gap Financing
We’re supporting affordable housing preservation by financing Naturally Occurring Affordable Housing (NOAH)—helping nonprofits buy and preserve affordable properties.
Impact Gap Financing provides the infrastructure to match Impact Investors with mission-focused Borrowers through a Freddie Mac facilitated Impact Gap Loan paired with an immediate Freddie Mac NOAH Preservation Loan.
PRESERVING NATURALLY OCCURRING AFFORDABLE HOUSING
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PRODUCT DESCRIPTION
Impact Gap Financing provides the infrastructure to enable Impact Investors to invest directly in NOAH properties and close capital gaps between Sponsor-provided equity and the Freddie Mac NOAH Preservation Loan. Impact Investors may work with Borrowers directly, with a Freddie Mac Multifamily Optigo lender, or with Freddie Mac, who can help match them to potential properties and Borrowers.
Nonprofits will work with an Optigo lender who will make both the Freddie Mac NOAH Preservation Loan and the Impact Gap Loan simultaneously, providing a one-stop shop for comprehensive debt financing up to 97% loan-to-cost to go with a minimum 3% Borrower equity contribution.
For the Optigo Seller to make the Freddie Mac NOAH Preservation Loan and the Impact Gap Loan together, the Impact Investor must be identified for the Impact Gap Loan prior to receiving a soft quote, and the following must be in place prior to interest rate-lock on the NOAH Preservation Loan:
- Impact Investor must execute and deliver a commitment to the Freddie Mac Seller to purchase the Impact Gap Loan.
• Freddie Mac will perform confirmatory due diligence and provide a back-up commitment to purchase in the event the Impact Investor fails to purchase the Impact Gap Loan. - Impact Investor must deposit funds in escrow to fully collateralize its commitment to purchase the Impact Gap Loan.
The Impact Gap Loan will be made on Freddie Mac form Impact Gap Loan documents, including the Impact Gap Loan commitment, loan agreement, note, guaranty, security instrument and escrow agreement.
- Impact Investor must execute and deliver a commitment to the Freddie Mac Seller to purchase the Impact Gap Loan.
NOAH PRESERVATION LOAN
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ELIGIBLE PROPERTY TYPES
Garden, mid-rise, or high-rise multifamily NOAH properties.
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ELIGIBLE OPTIGO LENDERS
TAH lenders.
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ELIGIBLE BORROWERS
501(c)(3) nonprofit organizations with affordable housing preservation as a stated part of its mission and a demonstrated history of successful property ownership.
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MINIMUM AFFORDABILITY
At least 50% of the units must have affordable rents at 60% / 80% / 100% / 120% area median income (AMI) based on market at the time of origination.
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LOAN TERM
Up to 30 years.
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MAXIMUM AMORTIZATION
Up to 30 years.
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MINIMUM DEBT COVERAGE RATIO (DCR)2
1.25x with 1.20x available subject to underwriting approval.
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MAXIMUM LOAN-TO-VALUE (LTV) RATIO2
80%.
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TAX AND INSURANCE ESCROWS
Required.
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FEES
- Application fee and Commitment fee.
- Servicing document review fee discounted to $1,500 per review for items disclosed prior to origination.
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PAYMENT STRUCTURE
Per Freddie Mac Commitment.
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PREPAYMENT PROVISIONS
Yield Maintenance or defeasance.
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NON-RECOURSE AND/OR GUARANTY
Per Freddie Mac Commitment.
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MODERATE REHABILITATION
Subject to underwriting approval.
IMPACT GAP LOAN1
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ELIGIBLE PROPERTY TYPES
Garden, mid-rise, or high-rise multifamily NOAH properties.
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ELIGIBLE OPTIGO LENDERS
TAH lenders.
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ELIGIBLE BORROWERS
501(c)(3) nonprofit organizations with affordable housing preservation as a stated part of its mission and a demonstrated history of successful property ownership.
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MINIMUM AFFORDABILITY
At least 50% of the units must have affordable rents at 60% / 80% / 100% / 120% area median income (AMI) based on market at the time of origination.
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LOAN TERM
Must mature after Freddie Mac NOAH Preservation Loan.
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MAXIMUM AMORTIZATION
Based on Exit Requirement (achieve 80% combined LTV by the end of the loan term).
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MINIMUM DEBT COVERAGE RATIO (DCR)2
Combined minimum: 1.05x subject to payment structure (below) and Investor approval.
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MAXIMUM LOAN-TO-VALUE (LTV) RATIO2
Combined maximum loan to cost: 97% subject to payment structure below and Investor approval.
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TAX AND INSURANCE ESCROWS
Required, serviced by Freddie Mac.
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FEES
As determined by Impact Investor (may include investor origination and servicing fees).
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PAYMENT STRUCTURE
Paid from 75% of surplus cash3 in the following order:
- Interest.
- Principal payments (not to exceed half of remaining surplus cash after interest payment).
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PREPAYMENT PROVISIONS
5-year lockout; no prepayment penalty following loc5-year lockout; no prepayment penalty following lockout.kout.
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NON-RECOURSE AND/OR GUARANTY
Borrower agrees to guaranty:
- 100% interest debt service.
- 10% top loss of outstanding UPB at default required until the combined LTV is 85%.
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MODERATE REHABILITATION
Permitted, subject to Impact Investor approval.
1Indicative terms – may vary by Investor.
2Underwriting parameters are maximum allowed by the program. Transactions will be screened on a deal-by-deal basis and parameters may be adjusted at the Freddie Mac Underwriting team’s discretion.
3Surplus Cash: Cash flow after payment of debt service, impositions and reserves on the Senior Loan, any other amount owed to Senior Lender, and reasonable operating expenses.
In its prequalifying review, Lument will attempt to estimate both the loan amount and the fees and costs associated with the transaction. Actual loan amounts and actual fees and expenses may vary from the prequalifying estimates. A prequalifying estimate is not a commitment to make a loan.