Fannie Mae Senior Housing Loans

Long Term, Low Interest Loans For Seniors Housing Projects

Fannie Mae Senior Housing Loans are provided under the purview of the Fannie Mae DUS Multifamily Loan Program. DUS, which stands for delegated underwriting and servicing, was created by Fannie Mae in 1989 to meet the needs of the capital markets. Fannie Mae brought tremendous liquidity to mortgage markets and provided real estate developers and owners of multifamily projects a source of long-term, fixed-rate, non-recourse financing that wasn’t subject to interruption.

Fannie Mae Senior Housing Loans were added to the DUS loan program, which broadly defines the original multifamily charter.  Fannie Mae Senior Housing Loans are designed to provide long term financing for two types of seniors housing projects, independent living and assisted living.

• Independent Living generally means a typical apartment complex that is age-restricted to seniors over +55 without minor children in the home. The traditional seniors housing apartment has all the usual features that a non-restricted property would have, such as swimming pool, club house, full kitchens and baths, and garages. Age-related services can also be provided, such as a small bus service, ATM banking, Internet service, hobbies and crafts, movies, and the like. Projects financed with Fannie Mae Senior Housing Loans cannot charge rental rates that exceed area market rents. No meal services or on-site medical services can be available. Independent living projects like these appeal to active seniors.
• Assisted Living projects generally rise to the next level of care whereby the management provides daily meal services, check-in service, health monitoring, and other services related to less active, frail elderly. Fannie Mae Senior Housing Loans for assisted living projects prohibit the provision of “nursing home” functions like on-site medical personnel and medical dispensation for non-ambulatory seniors or for Alzheimer’s patients.

Eligible Properties

Existing income-producing multifamily properties designated as either independent living or assisted living or both with at least three stable months of 90% occupancy or better. Properties can be newly constructed or recently rehabilitated.

Amortization and Loan Terms

Typically 30 years depending on property’s age with balloon terms of 5,7, or 10 years or full term loans of 25, or 30 years

Minimum Loan Size

Minimum programmatic loan size is $1,000,000 but preferred minimum is $5,000,000

Personal Liability

None recourse for monetary default with typical carve-outs

Eligible Borrowers

For-profit individuals and entities and not-for-profit single asset entities

Prepayment

All loans are subject to a prepayment penalty calculated using either a yield maintenance or defeasance formula for all but the last six months of the term of the loan. These terms can be modified by adjusting the interest rate.

Maximum Loan Refinancing

The amount supported by using a 1.45 to 1.00 debt service ratio or 75.0% of appraised value. There are no statutory limits to loan amounts

Interest Rate

Market interest rates change daily. Call for quote.

Assumability

All loans are assumable and transferable at anytime for a 1.00% fee

Origination Fee

Negotiable

Escrows

Required for property taxes, insurance, and replacement reserves as calculated by the underwriter

Repairs/Replacements

125% to 150% of the estimated cost of repairs per the physical needs report. Funds released upon completion.

Subordinate Financing

No third party subordinate financing, however Fannie Mae Supplemental Loans are allowed beginning 12 months after the initial first mortgage loan closing.

Preliminary Submission Package

• Location map and property description and photos (or website info)
• Unit mix showing type, number, size, and current rent of all units
• Description of commercial space if any
• Last three months rent rolls along with year-to-date financial statements
• Last full 36 month operating statements or pro-forma if recently completed construction
• Business resume and financial statement of principals and entity
• Terms of existing debt if any