Freddie Mac Multifamily’s Small-Balance Loan (SBL) program continues to grow, having another record year in 2018. The team executed almost 2,800 SBL loans, with $7.4 billion funded, making up 10% of Freddie Mac Multifamily’s volume last year.
The program, which launched at the end of 2014, focuses on a streamlined process and paperwork to facilitate access to affordable capital for owners of small apartment buildings.
According to Freddie Mac Multifamily, the flexible loan offering provides six different financing solutions across hybrid (fixed-to-float) and fixed-rate products, with 30-year amortization and up to 80% loan to value in certain markets.
Multifamily housing with five or more units, including senior housing with no resident services, properties with tenant-based housing vouchers, low-income housing tax credit projects with land-use restriction agreements that are in the final 24 months of the initial compliance period or the extended-use period, and properties with tax abatements, is eligible for loans up to $7.5 million in all markets.
For borrowers looking for small apartment loans, Freddie Mac SBL insiders from across the nation provide five tips for a faster and simpler process.
1. Lean In
To many borrowers, the process of obtaining an agency loan may be unfamiliar. “That’s why it’s so important to rely on the experience and expertise of our production and underwriting teams. We have a wealth of knowledge about every market and can help find the most suitable execution for every property. It may seem scary to go the agency route at first, but our streamlined process and longer-term, competitive rates with nonrecourse make it all worthwhile,” says Lamar Myers, production manager, Northeast region. “Our door is always open, and we’ll work with you to get the deal done. At the end of the day, Freddie Mac’s SBL team is a relatively small shop—you’ll get unparalleled service from a small group of locally positioned experts.”
2. Mission Minded
Borrowers can maximize their incentives with properties that also meet Freddie Mac’s mission. “Our mission is to support and expand the availability of affordable and workforce housing by delivering liquidity, consistency, and stability to the smaller property market segment. Our most competitive interest rates are available for properties that are considered affordable relative to their metropolitan area,” says Kelly Chou, production manager, West region. “Many borrowers in the smaller-balance space share our mission and are working to finance properties that achieve the maximum affordability-related interest rate incentives.”
3. Flexible Offerings
Freddie Mac offers a wide variety of loan terms and features at a competitive rate. “If you are a long-term hold investor who needs stability, choose our 10-year fixed or hybrid products. If you need short-term flexibility, choose our five-year products with flexible prepayment options,” says Annie Gong, production manager, Southwest region. “Interest-only terms are available if you would like to maximize your cash flow. We designed our products around the unique needs of you, the smaller property borrower.”
4. Speak Up
While no deal is perfect, it’s important to understand challenges with a property or a borrower upfront. “Freddie Mac has continued to enjoy a strong reputation of both getting in front of borrowers and a willingness to ‘listen to the story.’ That’s why we appreciate it when a sponsor, originator, or broker has asked the right questions and has complete information about their property,” says Cesar Diaz, senior producer, North Central region. “We field calls all day long—and enjoy engaging with our Optigo lenders about specific deals to guarantee the certainty of our streamlined execution.”
5. Be Present
Borrowers can be their own best advocates during the loan process. “Loans close much more efficiently when we learn about your first-hand knowledge, passion, and investment in the property. Critical details can be lost when hearing information second- or third-hand,” says Steve Malloy, senior producer, South Central region. “For example, personally attending the property inspection adds immeasurable details and value. Rapid responses to lender questions can be the difference between full proceeds (or not), and/or closing on time (or not). Focus on your loan and avoid distractions. We have the same goal as you—to close the loan on-time and at full proceeds—so take an active role in the entire process by being physically present, responsive to questions, and focused on the task at hand.”
