Fannie Mae Structured Adjustable Rate Apartment Loans

Fannie Mae Structured Adjustable Rate Apartment Loans

Fannie Mae structured adjustable rate apartment loans offer borrowers apartment financing with very low, adjustable mortgage rates. Also, the loans are convertible to fixed-rate loans when certain conditions are met.

Fannie Mae Structured Adjustable Rate Apartment Loans can be used for the acquisition or refinancing of existing, multifamily projects and manufactured housing communities. Seniors housing projects and moderate apartment rehabilitation projects may be possible, but must be approved on a case-by-case basis by Fannie Mae. Under no circumstances can Fannie Mae Structured Adjustable Rate Apartment Loans be used to finance projects that involve substantial rehabilitation or credit enhancements. They are available for loan amounts of $25 million and above. Maximum loan amounts are based on a maximum loan to value ratio of 75%, with minimum DSCR of 1.0x. Loan terms range from 5-10 years. See also:

Fannie Mae Multifamily Loans
Fannie Mae DUS Multifamily Loans
Fannie Mae Fixed Rate Multifamily Loans
Fannie Mae Loan Programs

Fannie Mae Apartment Loans Terms Sheet

Loan Program
Fannie Mae Structured Adjustable Rate Apartment Loans
Loan Purposes
Fannie Mae Structured Adjustable Rate Apartment Loans are for the acquisition or refinance of existing, stabilized apartment properties and manufactured housing community loans. Fannie Mae Bond Credit Enhancements and substantial rehabilitation loans are not eligible.
Eligible Properties
Conventional apartments; multifamily affordable housing properties; seniors housing properties; and manufactured housing communities. Mortgage loans secured by properties undergoing moderate rehabilitation may be eligible on a case-by-case basis.
Loan Amounts
Minimum loan amount $25 million
Maximum loan amount based on loan to value ratio and debt service coverage ratios
Loan Term
5, 7, or 10 years
Amortization Term
Up to a maximum of 30 years
Loan To Value Ratio
Maximum loan-to-value-ratio 75%
Debt Coverage Ratio
1.00x, using a DSCR calculated based on a variable underwriting rate equal to sum of (i) the Index, plus (ii) the investor spread, guaranty fee and servicing fee (the “Margin”), plus (iii) the interest rate cap escrow (if the cap term is shorter than the loan term), plus (iv) 3%, plus (v) the amortizing constant for that built-up rate. Regardless of the result of calculations, loan amount shall not exceed that of a fixed-rate loan of similar terms.
Prepayment Terms
Loans may be voluntarily prepaid upon payment of graduated prepayment based on one of the following:
• One-year lock-out, then declining prepayment premium 4% year 2, 3% year 3, 2% year 4, 1% thereafter.
• One-year lock-out with a 1% prepayment premium thereafter. No premium during last 3 mos of loan.
Personal Liability
Fannie Mae multifamily loans are non-recourse as to the borrower, with standard carve-outs for bad acts.
Escrow Requirements
Reserve for replacement, property tax and insurance escrows are required.
Third Party Reports
Standard third-party reports which include Appraisal, Phase One Environmental Assessment (ESA), and a Property Condition.
Rate Index
One month LIBOR or three month LIBOR.
Rate Adjustments
Interest rate adjusts based on changes to the underlying Index and is equal to the Index plus the Margin. In no event shall the interest rate ever be less than the Margin. There is no limit on rate changes.
Interest Rate Cap
There are no built-in periodic or lifetime caps on interest rates. Borrower may purchase an interest rate cap from an approved interest rate cap provider. The term of the initial interest rate cap need not be equal to the term of the mortgage loan, but must be for at least 5 years. If the loan term is longer than the interest rate cap term, the Borrower must escrow monthly for the purchase of the next interest rate cap.
Interest Rate Floor
The interest rate shall never be less than the Margin.
Rate Lock
30 to 180 day interest rate lock commitments. An early rate lock feature is available, allowing the borrower to lock a rate after preliminary underwriting.
Convert to Fixed Rate
Fannie Mae Structured Adjustable Rate Apartment Loans have a conversion feature that allows the borrower to convert the loan to a 7- or 10-year fixed-rate loan. The conversion can occur on any rate change date beginning with the first day of the second loan year and ending on the first day of the third month prior to maturity. The loan can not have been delinquent during the previous 12 months and the borrower can not in default under any loan documents.

  • No prepayment penalty is charged at the time of the conversion to fixed-rate.
  • Minimal re-underwriting;
  • Lender determines that the current NOI can support the new fixed-rate.
  • No increase in the loan amount; loan may be eligible for a Supplemental loan.

Key Takeaways

Fannie Mae Structured Adjustable Rate Apartment Loans offer low interest multifamily loans for the acquisition or refinancing of existing, stabilized multifamily properties. The loans offer flexible terms, prepayment options and the ability to choose interest rate caps.

  • Minimum loan amount $25 million, no maximum loan amount.
  • Maximum loan to value ratio 75% and maximum DSCR 1.0X
  • Loan terms from 5-10 years with amortization from 25 to 30 years
  • Loans are convertible to fixed-rate on specific dates (conditional)

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