Interest Rates: 

• Fixed, variable-rate, and interest-only loan options available

• Fixed rate bonds sometimes require re-marketing/rate reset after 10 years

• An 18-year minimum term and initial reset period is mandatory for properties with 20% or more Low-Income Housing Tax Credit (LIHTC) units

• Variable-rate bonds typically have the option to convert to fixed-rate bonds, for a minimum 10-year period, or, if less than 10 years, for the remainder of the credit enhancement

Interest Rate Caps: For variable-rate bonds, borrowers must purchase an interest rate cap with a term of at least 5 years. Borrowers must purchase a new cap when the cap expires. 

Maximum LTV: 

• Variable-rate:

• 85% (without value of tax-exempt financing)

• 80% (including value of tax-exempt financing)

• Fixed-rate:

  • 85% (without value of tax-exempt financing)

  • 80% (including value of tax-exempt financing)

  • 90% (for projects with 90% or more Low-Income Housing Tax Credits (LIHTCs)

Minimum DSCR:  1.00x, as calculated via a variable underwriting rate 

Prepayment Penalty: Flexible options available 

Recourse: Loans are non-recourse with standard “bad boy” carve-outs 

Eligible Properties: 

• Multifamily Affordable Housing (MAH) Developments

• 4% LIHTC Properties

• 80-20s (deals in which 20% of the property is set aside for low income residents)

• Bond refunding and new issues allowed

Third-Party Subordinate Debt: Allowed under certain circumstances: hard debt must be issued by a non-profit, public, or quasi-public entity and combined DSCR cannot go below 1.05x, while soft third-party subordinate debt payments cannot exceed 75% of property cash flow "after payment of senior liens and property operating expenses"

Assumability:  Fully assumable with lender approval and a 1% fee

Advantages:

• Competitive interest rates

• Up to 85% LTV allowance

• Up to 35 year amortization

• 30 day rate locks allowed

• Loans are non-recourse

• Supplemental financing is allowed (up to two supplemental mortgages allowed, with a third allowed under certain circumstances if the loan is assumed by a new borrower)

• No put feature (the bond holder cannot demand that the issuer pay back the bond in advance)

• Forward commitments for new construction available

Disadvantages:

• No limits on rate changes

• Borrowers must purchase interest rate cap from an approved provider

• Requires third-party reports including Phase I Environmental Assessment, Property Condition assessment, and Appraisal

• Issuer and trustee fees required

In this article:
1. Fannie Mae Bond Financing Solutions for Multifamily Borrowers
2. Sample Fannie Mae Terms for Credit Enhanced Variable-Rate Tax-Exempt Bonds in 2025
3. Get Financing