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Fannie Mae MBS as Tax-Exempt Bond Collateral (M.TEB)
This type of financing allows for incredibly generous LTV allowances of up to 90% and interest-only loan options.
Fannie Mae Issued Taxable and Tax-Exempt Bonds for Financing the Rehabilitation of Affordable Multifamily Developments
If you're an investor looking to rehabilitate a Multifamily Affordable Housing (MAH) development, the Fannie Mae MBS as Tax-Exempt Bond Collateral (M.TEB) could be a great solution. M.TEB execution is available for both existing bond refunding and new bond issues for properties using 4% Low-Income Housing Tax Credits (LIHTCs). This type of financing allows for incredibly generous LTV allowances up to 90% and interest-only loan options, making it a flexible and affordable option for many investors.
To learn more, check out our official Fannie Mae MBS as Tax-Exempt Bond Collateral Product Sheet or keep reading below for an in-depth explanation of the M.TEB financing program.
Sample Fannie Mae Terms For MBS as Tax-Exempt Bond Collateral (M.TEB) in 2023
Size: No minimum or maximum loan size
Terms: 10-30 years
Amortization: Up to 35 years
Interest Rates: Fixed, variable-rate, and interest-only loan options available
Maximum LTV: Up to 90%
Minimum DSCR: 1.00x for Structured ARM, 1.15x for fixed-rate
Prepayment Penalty: Yield maintenance and declining prepayment premium options available
Eligible Properties:
4% LIHTC Properties
80-20s (deals in which 20% of the property is set aside for low income residents)
Refunding of existing bonds
Competitive interest rates (typically 0.20-0.25% better pricing than regular bond credit enhancement)
Up to 90% LTV allowance
Up to 35 year amortization
Interest-only options
Flexible structure and certainty of execution
Wide investor base
Tax-exempt or taxable interest allowed
Advantages
Case Study: Rehabbing an Atlanta Property
Let's consider the case of Elena, a dedicated investor and developer based in Atlanta, Georgia, who is committed to rehabilitating Multifamily Affordable Housing (MAH) developments in her community. She has recently acquired a property set aside for low-income residents under the 80-20 scheme and intends to renovate and preserve the affordability of this property. In order to fund this project, Elena looks to Fannie Mae's MBS as Tax-Exempt Bond Collateral (M.TEB) program.
The project Elena is working on fits well within the eligible properties for M.TEB financing, as it involves the rehabilitation of an 80-20 property. She also plans to utilize 4% Low-Income Housing Tax Credits (LIHTCs), which again, aligns with the conditions of the M.TEB program.
Since there is no minimum or maximum loan size for M.TEB financing, Elena has the flexibility to request funds according to the specific needs of her project. She estimates the cost of rehabilitation at $12 million. Taking advantage of the generous LTV allowance of up to 90% under the M.TEB program, Elena could secure financing up to $10.8 million.
Fannie Mae's M.TEB program offers loan terms between 10-30 years and amortization periods of up to 35 years, providing Elena with flexibility in loan repayment. The program also provides fixed, variable-rate, and interest-only loan options. This variety allows Elena to choose the type of interest rate that aligns best with her financial strategy and the projected cash flow from the property.
One of the key advantages of the M.TEB program is its competitive interest rates, typically 0.20% to 0.25% better than regular bond credit enhancement. This means Elena could potentially save a significant amount of money over the life of the loan, making her rehabilitation project more financially feasible.
By opting for Fannie Mae M.TEB financing, Elena can not only secure the necessary funding for her rehabilitation project, but also contribute to the preservation and availability of affordable housing in her local community.
This is a fictional case study provided for illustrative purposes.