Bond Credit Enhancement

Description

Fannie Mae provides credit enhancement for tax-exempt multifamily housing revenue bonds that have low and moderate income occupancy restrictions; Fixed rate bonds can be enhanced; Enhancement is rated AAA, and can be used in either a “Refunding” or a “Credit Substitution”

Loan Amount

Minimum $3,000,000

Loan Terms

10 to 30 Years

Amortization

Up to 30 Years

Loan to Value Maximum

Maximum 85% of conventional appraised value or 80% of “tax exempt” appraisal (with cap rate reflecting tax exempt financing), except in the case of 4% LIHTC in which the maximum LTV increases to 90%

Coverage Minimum

1.25x for fixed rate, except in the case of 4% LIHTC in which the minimum DSCR decreases to 1.15x

Borrower

Domestic single asset borrowing entity is required

Interest Rate

Risk-based pricing, varies with LTV and DSC ratios

Third Party Reports

MAI appraisal, Physical Needs Assessment, and Environmental Phase I Assessment are required for all deals; Seismic Report is required for properties in Seismic Zone 4; A market study may also be required.

Reserves

Tax and insurance escrows are required; Repair and Replacement escrow funding is required based on engineer’s Physical Needs Assessment; For loans at less than 65% of value with no deferred maintenance, funding of repair and replacement reserve can be waived, at lender’s discretion

Application and Due Diligence Fees

$2,500 non-refundable Application Fee to cover internal underwriting; $12,500 Due Diligence Fee to cover third party reporting

Origination Fee

Fannie Mae requires minimum origination fee equal to one percent of loan amount; can be reduced for loans over $9 million

Legal Fees

Fannie Mae’s legal fees are estimated at $35,000; Lender’s legal fees are estimated at $25,000

Timing

Timing is dependent on type of credit enhancement, status of bonds, 3rd party report timing and borrower’s submission of due diligence

Multifamily Financing Overview

Multifamily Financing OverviewProperty Types Financed
Typical Loan Structure

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