FREDDIE MAC OPTIGO®
Non-LIHTC Forwards
Freddie Mac’s Non-LIHTC Forward financing helps preserve and create affordable housing stock through flexible transaction structuring and certainty of execution at lower costs to the borrower.
Borrowers get the financing they need for affordable multifamily properties funded by public or mission-driven financial investment—whether it’s for new construction or major rehabilitation.
CREATING AFFORDABLE AND WORKFORCE HOUSING
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PRODUCT DESCRIPTION
Unfunded forward commitments for affordable housing developed by nonprofits and subsidized, affordable housing developed by for-profit developers for new multifamily construction or substantial rehabilitation.
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ELIGIBLE PROPERTY TYPES
To-be-built or substantially rehabilitated garden, mid-rise, or high-rise multifamily property with public or mission-driven financial investment.
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FINANCIAL INVESTMENT AND AFFORDABILITY REQUIREMENTS
For-Profit Borrowers
Public/Mission-Driven Financial Investment must be quantified as at least 10% of the first mortgage UPB. The subsidy must be for the minimum term of the mortgage. Sources of Public/Mission-Driven Financial Investment could include:- Subordinate debt from a government affiliated lender – soft or hard debt.
- Real estate tax abatements or PILOT (payment in lieu of taxes) programs.
- Low payment long-term ground lease agreements.
- Mission-driven nonprofit entity(ies) providing equity.
The PV (present value) of the real estate tax abatement or PILOT or ground lease payment are calculated with a PV rate equal to the fixed-rate mortgage coupon plus 100 bps.
- Affordability requirements:
10% of the units must have rent and income restrictions for the term of the mortgage at or below the following thresholds based on FHFA market designations:
– Standard Markets – at or below 80% of AMI.
– Cost Burdened Markets – at or below 100% of AMI.
– Very High Cost Burdened Markets – at 120% of AMI.
- An additional 70% of the units at the property must be affordable at the same levels, but do not require rent and income restrictions.
- 20% of the units at the property may be at market rents based on the subject location.
Nonprofit Borrowers
- The sponsor must be a 501(c)(3) whose primary purpose and tax-exempt status depends on the public purpose of providing affordable housing
- The general partner or managing member of the borrower must be a nonprofit. Being the co-general partner for the purposes of qualifying for a real estate tax abatement is not sufficient.
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TERMS
- Fixed-rate – Up to 30 years.
- Floating Rate – Up to 10 years.
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TYPE OF FUNDING
Forward commitment to provide permanent financing upon successful conversion from construction phase to permanent phase (unfunded forward).
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MINIMUM DEBT COVERAGE RATIO (DCR)
1.25x.
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MAXIMUM LOAN-TO-VALUE (LTV) RATIO
80%.
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CONSTRUCTION LOAN TERM
36 months maximum.
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MAXIMUM AMORTIZATION
30 years.
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PREPAYMENT PROVISIONS
Yield Maintenance.
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SUBORDINATE FINANCING
Permitted.
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TAX AND INSURANCE ESCROWS
Required.
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FEES
Application Fee, Commitment Fee, Credit Facility Fee, Delivery Assurance Fee, other fees, as applicable.
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.
