Fannie Mae Mortgage

Fannie Mae (FNMA) Multifamily Loans - Apartment Mortgages


The Federal National Mortgage Association (FNMA), commonly known as “Fannie Mae” offers federally guaranteed mortgages and is one of the largest multifamily loan programs in the country. Most Fannie Mae apartment loans are non-recourse (except standard carve outs) and properties are underwritten using its Delegated Underwriting Services (DUS) program to make sure that lending parameters are met. Loan collateral may be traditional apartments, affordable housing, senior housing, student housing, and manufactured housing communities. Loan amounts start at $750,000 and go up with terms between 5-30 years and amortizations up to 30 years.


Loan Type *Property Type Min Loan Amount Max LTV Term Length Amortization Rates
Fannie Mae (FNMA) A, AH, C, MH, SH, ST $750,000 80% 3-30 Years 15-30 Years
*A = Apartment AH = Affordable Housing C = Cooperative Housing MH = Manufactured Housing SH = Senior Housing ST = Student Housing
Additional Information: | Parameters | Loan Features | Prepayment Penalties | Loan Servicing

Fannie offers both fixed and variable products for all property types and can go nationwide, although primary and large secondary markets are preferred (i.e. MSA populations of at least 200,000). There are 2 major Fannie Mae programs under which the majority of the products fall:

Standard DUS Mortgage: The Standard DUS product is for the purchase or refinance of existing, stabilized properties including: traditional, affordable housing, senior housing, student housing, and manufactured housing communities. Properties must have a minimum of five units (50 pad sites for manufactured housing) and the Borrower must be a single-asset U.S. entity with all U.S. principals. Borrowers may also have foreign ownership interests, subject to proper structuring of the borrowing entity. Minimum loan amount is $750,000. Maximum LTV is 80% for purchases and 75% for refinances with a minimum 1.25x DSCR requirement, but this will depend on the collateral.*

    * “Pre-Review” markets have a maximum LTV of 65% without a waiver granted by Fannie Mae.

Small Loan Program: The Small Loans product is for the purchase or refinance of existing, stabilized properties including: traditional, affordable housing, seniors housing, student housing, and manufactured housing communities. Properties must have a minimum of five units (50 pad sites for manufactured housing) and the Borrower must be a single-asset U.S. entity with all U.S. principals. Borrowers may also have foreign ownership interests, subject to proper structuring of the borrowing entity. Loan amount must be between $750,000 - $3 million ($5 million in eligible MSAs*). Maximum LTV is 80% for purchases and 75% for refinances with a minimum 1.25x DSCR requirement, but but this will depend on the collateral.**

    * Eligible MSAs include: Baltimore, Boston, Chicago, Los Angeles, New York, Sacramento, San Diego, San Francisco, San Jose, Seattle, and Washington DC.
    ** Unless in a “Pre-Review” market which has a maximum LTV of 65% without a waiver granted by Fannie Mae

Programs & Underwriting Parameters

 

Traditional Housing

Fixed-Rate Mortgage: The Fixed-Rate product is for the purchase or refinance of existing, stabilized properties including: traditional, affordable housing, seniors housing, student housing, and manufactured housing communities. Maximum LTV is 80% for purchases and 75% for refinances with a 1.25x DSCR requirement. Loan terms are from 5-15 years.

Structured Adjustable-Rate Mortgage: The Structured ARM product is for the purchase or refinance of existing, stabilized traditional and manufactured housing communities. Senior housing, student housing, and moderate rehabilitation mortgages may be eligible on a case-by-case basis. Affordable housing, bond credit enhancements and substantial rehabilitation are not eligible. The minimum loan amount is $25 million, maximum LTV is 75%, minimum DSCR is 1.0x and terms range from 5-10 years.

Adjustable Rate Mortgage 7-6: The ARM 7-6 product is for the purchase or refinance of existing, stabilized properties including: traditional, affordable housing, seniors housing, student housing, and manufactured housing communities. Maximum LTV is 80% for purchases and 75% for refinances with a 1.00x DSCR requirement at the loan cap rate. Loan terms are 7 years with a 1 year lock-out period and a 1% prepayment premium thereafter.

M-PIRE Mortgage: The M-PIRE product provides first lien and supplemental mortgage loans for conventional, affordable and cooperative housing that support additional loan proceeds for energy and water efficiency renovations within New York City’s five boroughs. Properties must have a minimum of five units (50 pad sites for manufactured housing) and the Borrower must be a single-asset U.S. entity with all U.S. principals. Maximum LTV is 85% for purchases and 80% for refinances with a 1.20x DSCR requirement.

Supplemental: The Supplemental Loans product is subordinate financing for properties with a pre-existing fixed or adjustable Fannie Mae Mortgage Loan that has been in place for a minimum of 12 months. Maximum LTV is 75% and minimum DSCR is 1.30x. New third party reports may not be required and early rate lock is available for a fee.

Choice Refinance Program: The Choice Refinance product is a streamlined refinance process with more limited documentation for existing DUS Cash or MBS mortgages to be refinanced by the same Lender. Properties must be stabilized and well-maintained and mortgages must be in good standing.

 

Student Housing

Fixed-Rate Mortgage: The Fixed-Rate product is for the purchase or refinance of existing, stabilized properties including: traditional, affordable housing, seniors housing, student housing, and manufactured housing communities. Maximum LTV is 80% for purchases and 75% for refinances with a 1.25x DSCR requirement. Loan terms are from 5-15 years.

Structured Adjustable-Rate Mortgage: The Structured ARM product is for the purchase or refinance of existing, stabilized traditional and manufactured housing communities. Senior housing, student housing, and moderate rehabilitation mortgages may be eligible on a case-by-case basis. Affordable housing, bond credit enhancements and substantial rehabilitation are not eligible. The minimum loan amount is $25 million, maximum LTV is 75%, minimum DSCR is 1.0x and terms range from 5-10 years.

Adjustable Rate Mortgage 7-6: The ARM 7-6 product is for the purchase or refinance of existing, stabilized properties including: traditional, affordable housing, seniors housing, student housing, and manufactured housing communities. Maximum LTV is 80% for purchases and 75% for refinances with a 1.00x DSCR requirement at the loan cap rate. Loan terms are 7 years with a 1 year lock-out period and a 1% prepayment premium thereafter.

Student Housing Financing: The Student Housing product provides financing options for the finance or refinance of stabilized student housing properties, which is defined as a conventional multifamily property where 20% or more of the units are leased to undergraduate and/or graduate students, or a property that is specifically built or leased for student housing. Properties may be rented on a per-unit or per-bed basis. Maximum LTV is 75%, minimum DSCR is 1.30x.

Supplemental: The Supplemental Loans product is subordinate financing for properties with a pre-existing fixed or adjustable Fannie Mae Mortgage Loan that has been in place for a minimum of 12 months. Maximum LTV is 75% and minimum DSCR is 1.30x. New third party reports may not be required and early rate lock is available for a fee.

Choice Refinance Program: The Choice Refinance product is a streamlined refinance process with more limited documentation for existing DUS Cash or MBS mortgages to be refinanced by the same Lender. Properties must be stabilized and well-maintained and mortgages must be in good standing.

 

Affordable Housing

Fixed-Rate Mortgage: The Fixed-Rate product is for the purchase or refinance of existing, stabilized properties including: traditional, affordable housing, seniors housing, student housing, and manufactured housing communities. Maximum LTV is 80% for purchases and 75% for refinances with a 1.25x DSCR requirement. Loan terms are from 5-15 years.

Adjustable Rate Mortgage 7-6: The ARM 7-6 product is for the purchase or refinance of existing, stabilized properties including: traditional, affordable housing, seniors housing, student housing, and manufactured housing communities. Maximum LTV is 80% for purchases and 75% for refinances with a 1.00x DSCR requirement at the loan cap rate. Loan terms are 7 years with a 1 year lock-out period and a 1% prepayment premium thereafter.

Affordable Housing Preservation: This Affordable Housing product provides options for preserving the availability and affordability of subsidized rental housing for low-income renters. It is for expiring Low Income Housing Tax Credit (LIHTC) deals, refinancing of tax-exempt bond deals, properties with Section 8 HAP contracts, properties with existing RD 515 and RD 538 loans, and mortgages insured under Sections 202 or 236 of the National Housing Act. Maximum LTV is 80%, minimum DSCR is 1.20x, and loan terms range from 10-30 years.

Green Preservation Plus: The Green Preservation product provides additional loan proceeds to finance energy and water efficiency improvements for existing Multifamily Affordable Housing (MAH) properties that are 10 years or older and meet MAH income and rent restrictions during the loan term. The Borrower must be a single-asset U.S. entity with all U.S. principals. Maximum LTV is 85% for purchases and 80% for refinances with a 1.20x DSCR requirement.

M-PIRE Mortgage Loan: The M-PIRE product provides first lien and supplemental mortgage loans for conventional, affordable and cooperative housing that support additional loan proceeds for energy and water efficiency renovations within New York City’s five boroughs. Properties must have a minimum of five units (50 pad sites for manufactured housing) and the Borrower must be a single-asset U.S. entity with all U.S. principals. Maximum LTV is 85% for purchases and 80% for refinances with a 1.20x DSCR requirement.

Tax-Exempt Bond Credit Enhancement: The Bond Credit Enhancement program provides credit enhancement for tax-exempt bonds issued to finance the acquisition, new construction, refinancing, or moderate to substantial rehabilitation of Multifamily Affordable Housing (MAH) properties with Low Income Housing Tax Credit (LIHTC) rent restrictions. Maximum LTV is 90%, minimum DSCR is 1.15x, and loan terms range from 10-30 years.

Supplemental: The Supplemental Loans product is subordinate financing for properties with a pre-existing fixed or adjustable Fannie Mae Mortgage Loan that has been in place for a minimum of 12 months. Maximum LTV is 75% and minimum DSCR is 1.30x. New third party reports may not be required and early rate lock is available for a fee.

Choice Refinance Program: The Choice Refinance product is a streamlined refinance process with more limited documentation for existing DUS Cash or MBS loans to be refinanced by the same Lender. Properties must be stabilized and well-maintained and mortgages must be in good standing.

 

Senior Housing

Fixed-Rate Mortgage: The Fixed-Rate product is for the purchase or refinance of existing, stabilized properties including: traditional, affordable housing, seniors housing, student housing, and manufactured housing communities. Maximum LTV is 80% for purchases and 75% for refinances with a 1.25x DSCR requirement. Loan terms are from 5-15 years.

Structured Adjustable-Rate Mortgage: The Structured ARM product is for the purchase or refinance of existing, stabilized traditional and manufactured housing communities. Senior housing, student housing, and moderate rehabilitation mortgages may be eligible on a case-by-case basis. Affordable housing, bond credit enhancements and substantial rehabilitation are not eligible. The minimum loan amount is $25 million, maximum LTV is 75%, minimum DSCR is 1.0x and terms range from 5-10 years.

Adjustable Rate Mortgage 7-6: The ARM 7-6 product is for the purchase or refinance of existing, stabilized properties including: traditional, affordable housing, seniors housing, student housing, and manufactured housing communities. Maximum LTV is 80% for purchases and 75% for refinances with a 1.00x DSCR requirement at the loan cap rate. Loan terms are 7 years with a 1 year lock-out period and a 1% prepayment premium thereafter.

Senior Housing Financing: The Senior Housing product is for the finance or refinance of existing properties that provide Independent Living (IL), Assisted Living (AL), Alzheimer’s/Dementia Care (ALZ), or any combination thereof (e.g. IL/AL/ALZ, AL/ALZ) for senior citizens. Sponsors and Operators must have a minimum of five years experience in the seniors housing industry and a minimum of five stabilized properties. Maximum LTV is 75%, minimum DSCR is 1.30x. for IL, 1.40x for AL, and 1.45x for ALZ.

Manufactured Housing Communities: The MHC product provides financing options for the purchase and refinance of stabilized communities where the Borrower owns the Manufactured Housing Community (MHC) sites and associated common amenities and infrastructure. Communities must be professionally managed, with or without age restrictions, and have a minimum of 50 pad sites. Maximum LTV is 80%, minimum DSCR is 1.25x.

Supplemental: The Supplemental Loans product is subordinate financing for properties with a pre-existing fixed or adjustable Fannie Mae Mortgage Loan that has been in place for a minimum of 12 months. Maximum LTV is 75% and minimum DSCR is 1.30x. New third party reports may not be required and early rate lock is available for a fee.

Choice Refinance Program: The Choice Refinance product is a streamlined refinance process with more limited documentation for existing DUS Cash or MBS mortgages to be refinanced by the same Lender. Properties must be stabilized and well-maintained and mortgages must be in good standing.

 

Manufactured Housing

Fixed-Rate Mortgage: The Fixed-Rate product is for the purchase or refinance of existing, stabilized properties including: traditional, affordable housing, seniors housing, student housing, and manufactured housing communities. Maximum LTV is 80% for purchases and 75% for refinances with a 1.25x DSCR requirement. Loan terms are from 5-15 years.

Structured Adjustable-Rate Mortgage: The Structured ARM product is for the purchase or refinance of existing, stabilized traditional and manufactured housing communities. Senior housing, student housing, and moderate rehabilitation mortgages may be eligible on a case-by-case basis. Affordable housing, bond credit enhancements and substantial rehabilitation are not eligible. The minimum loan amount is $25 million, maximum LTV is 75%, minimum DSCR is 1.0x and terms range from 5-10 years.

Adjustable Rate Mortgage 7-6: The ARM 7-6 product is for the purchase or refinance of existing, stabilized properties including: traditional, affordable housing, seniors housing, student housing, and manufactured housing communities. Maximum LTV is 80% for purchases and 75% for refinances with a 1.00x DSCR requirement at the loan cap rate. Loan terms are 7 years with a 1 year lock-out period and a 1% prepayment premium thereafter.

Manufactured Housing Communities: The MHC product provides financing options for the purchase and refinance of stabilized communities where the Borrower owns the Manufactured Housing Community (MHC) sites and associated common amenities and infrastructure. Communities must be professionally managed, with or without age restrictions, and have a minimum of 50 pad sites. Maximum LTV is 80%, minimum DSCR is 1.25x.

Supplemental: The Supplemental Mortgage product is subordinate financing for properties with a pre-existing fixed or adjustable Fannie Mae Mortgage Loan that has been in place for a minimum of 12 months. Maximum LTV is 75% and minimum DSCR is 1.30x. New third party reports may not be required and early rate lock is available for a fee.

Choice Refinance Program: The Choice Refinance product is a streamlined refinance process with more limited documentation for existing DUS Cash or MBS mortgages to be refinanced by the same Lender. Properties must be stabilized and well-maintained and mortgages must be in good standing.

 

Cooperative Housing

Cooperative Property Financing: The Cooperative Property product provides financing options for the purchase and refinance of stabilized properties in eligible markets in which the residents collectively own the building(s) and property through their shares in the cooperative corporation. The cooperative corporation grants occupancy rights to the shareholder tenants through proprietary leases. Maximum LTV is 55%, minimum DSCR is 1.0x.

M-PIRE Mortgage Loan: The M-PIRE product provides first lien and supplemental mortgage loans for conventional, affordable and cooperative housing that support additional loan proceeds for energy and water efficiency renovations within New York City’s five boroughs. Properties must have a minimum of five units (50 pad sites for manufactured housing) and the Borrower must be a single-asset U.S. entity with all U.S. principals. Maximum LTV is 85% for purchases and 80% for refinances with a 1.20x DSCR requirement.

Choice Refinance Program: The Choice Refinance product is a streamlined refinance process with more limited documentation for existing DUS Cash or MBS mortgages to be refinanced by the same Lender. Properties must be stabilized and well-maintained and mortgages must be in good standing.

Loan Features

Term Length/Amortization: Loan terms range from 5-30 years with amortizations up to 30 years, depending on the type, location, and condition of the collateral. Depending on the way the loan is structured, it may “balloon” at the end of the term, meaning at the loan balance will need to either be refinanced or paid off; otherwise the loan is self-amortizing, meaning that the loan will be fully paid off when the loan matures, so there is no loan balance to pay off (unless the loan is prepaid before it matures).

Recourse: Most mortgages are non-recourse, except for standard carve-out provisions. Full recourse mortgages make the sponsors guarantying the loan responsible for any and all shortfalls between the loan balance and sales price in the event of default and foreclosure as well as any applicable legal and ancillary fees. Non-recourse means is that the Borrowers are not personally liable for the repayment of the loan and that the collateralized property and its cash flows would be the sole source of repayment of the debt in the event of a foreclosure. However, in the event the Borrower actively participates in an activity that could cause harm to the property, Lender, or investors, there could be springing recourse in some limited circumstances; this may include loan fraud, property transfer or subordinate financing without consent of the Lender, voluntary or collusive activity leading to a bankruptcy filing or failure to maintain SPE status, among other such actions.

Rate Lock: An early rate lock feature is available with a good faith deposit, allowing the borrower to lock a rate 45 to 180 days in advance of closing. Otherwise the rate will lock 1-2 days before closing.

Loan Assumption: Fannie Mae Loans are assumable for a 1% fee, but the new assuming borrower (i.e. Purchaser) must qualified by meeting the original underwriting standards. Typically this occurs when the Borrower wants to sell the commercial real estate that secures the loan, and the Purchaser of the property wants to take the loan over. Once the property sale and assumption is completed, the Purchaser becomes the owner of the property and is bound by the original terms of the assumed loan and the original Borrower/Seller is released from its obligation to the property and the existing loan. The benefit of this structure is that the assumption of the loan allows the Borrower/Seller to avoid defeasance or other pre-payment costs and give the buyer the opportunity to assume a loan that may have favorable terms than what is market. Loan assumption is an especially attractive option in high interest rate environments or tight credit environments.

Pre-Review Markets: The following markets require Fannie Mae Pre-Approval prior to (or at time of) issuing the loan application. In most cases, the Lender will require mortgages in these markets to be Tier 3 (65% LTV Maximum) without a waiver granted by Fannie Mae.

Pre-Review Markets
Abilene, TX (MSA)
Atlanta, GA (MSA)
Auburn, AL (MSA)
Cincinatti, OH (MSA)
Houston, TX (MSA)
Jacksonville, FL (MSA)
Indiana (State)
Las Vegas, NV (MSA)
New Orleans, LA (MSA)
North Dakota (State)
Ohio (State)
Phoenix, AZ (MSA)
Tuscon, AZ (MSA)
Guam (Territory)
Michigan (State)
Puerto Rico (Territory)
US Virgin Islands

Prepayment Penalty Structures

Yield Maintenance: The goal of Yield Maintenance is to allow the bond investors to maintain the same yield as if the borrower made all scheduled mortgage payments until maturity. The penalty is typically calculated by a formula contained in the Note of the Loan Documents. The language will vary between different institutions, but will typically have the same two amounts to be repaid, namely: 1) The loan’s unpaid principal balance and 2) a prepayment penalty, which is typically determined by calculating the difference between the loan’s interest rate and the replacement rate (based on the US Treasury rate that most closely corresponds to the maturity date), with the remaining loan payments discounted back for the time value of money. For more specific detail, you may review the Yield Maintenance Schedule to the loan documents or see a mathematical representation . One thing to keep in mind is that yield maintenance provisions contain a prepayment penalty “floor” of at least 1%.

Declining (Step-Down) Prepayment Penalty: A declining prepayment penalty may be structured in a variety of ways, but always has the same feature of the prepayment penalty lessening by 1% per step with the last 3-12 (or more) months open to prepay or refinance without penalty. These are usually offered on shorter-term mortgages (i.e. 5-10 years), but could potentially be offered on longer terms as well. An example of a 5 and 10 year declining prepayment penalty would be the following:

  • 5 Year Declining: 5% of loan amount if prepaid in the first year, 4% if prepaid in the second year, 3% if prepaid in the third year, 2% if prepaid in the fourth year, and 1% if prepaid in the fifth year, also represented as 5-4-3-2-1% or 5% declining.
  • 10 Year Declining: 5% of loan amount if prepaid in the first or second year, 4% if prepaid in the third or fourth year, 3% if prepaid in the fifth or sixth year, 2% if prepaid in the seventh or eighth year, and 1% if prepaid in the ninth or final year, also represented as 5-5-4-4-3-3-2-2-1-1% or 5% declining.

Loan Servicing:

The Fannie Mae lender or a third party may service the loans. The Master Servicer is responsible for day-to-day loan servicing practices including collecting loan payments, managing escrow accounts, analyzing financial statements inspecting collateral and reviewing borrower consent requests. All non-performing mortgages are usually sent to the special servicer. The special servicer is responsible for preforming customary work-out related duties including extending maturity dates, restructuring mortgages, appointing receivers, foreclosing the lender’s interest in a secured property, managing the foreclosed real estate and selling the real estate. Under some situations, master servicers subcontract some of their responsibilities to a primary or sub servicer in order to uphold the servicing standard when they need additional assistance.