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Fannie Mae Moderate Rehabilitation Supplemental Loans
Fannie Mae Moderate Rehab Loans have terms between five and 30 years, amortizations up to 30 years, and combined LTVs of up to 75%.
Do you own a property that's recently undergone a moderate rehabilitation with Fannie Mae financing? Do you need more funds — maybe for additional improvements? A Fannie Mae Moderate Rehabilitation Supplemental Loan could be a great fit.
Fannie Mae Moderate Rehabilitation Supplemental Loans have terms between five and 30 years and amortizations of up to 30 years, though they must end at the same time as the original moderate rehabilitation loan.
These loans have a combined LTV allowance up to 75% (though this may be larger for affordable properties), are non-recourse, and are fully assumable with lender approval.
Sample Fannie Mae Terms For Moderate Rehabilitation Supplemental Loans in 2024
Terms: 5- to 30-year loan terms available, supplemental loans must end at the same time as the original mortgage loan
Amortization: Up to 30 years, interest-only loans are available
Interest Rates: Fixed- and adjustable-rate loans available
Maximum LTV: Combined LTV of up to 75% (may be higher for affordable properties)
Minimum DSCR: Combined DSCR as low as 1.25x (may vary due to asset class and how proceeds are used)
Rehab Requirements: Property improvements must average at least $8,000/unit
Eligible Borrowers: Borrowers must typically be U.S.-based single asset entities
Must be a stabilized property, can include multifamily affordable housing properties, student housing, seniors housing, and manufactured housing communities
Must already have an original Fannie Mae mortgage for moderate rehabilitation
Fannie Mae must be the only debt-holder on the property
Advantages of Moderate Rehabilitation Supplemental Loans
Competitive interest rates
Loans are non-recourse
Standard rate locks available
Lower cost than refinancing
Not subjected to Fannie Mae's "one supplemental loan" rule
Disadvantages of Moderate Rehabilitation Supplemental Loans
- Requires third-party reports including a Property Condition Assessment, Appraisal, and Phase I Environmental Assessment (may not be required in certain circumstances)
Case Study: Renovations in Sacramento
Let's consider a scenario in Sacramento, California, involving a property investor named Rachel. Rachel had recently acquired a 50-unit apartment complex, funding its renovation using a Fannie Mae Moderate Rehabilitation Loan. These renovations significantly increased the value of the property and helped maintain high occupancy rates.
After the completion of the primary renovations, Rachel discovered an opportunity to boost the property's appeal even more. She planned to upgrade the common areas such as the lobby, outdoor seating spaces, and the laundry room. The estimated cost of these additional improvements was around $150,000.
To secure the necessary funds, Rachel opted to apply for a Fannie Mae Moderate Rehabilitation Supplemental Loan. Her existing loan was in good standing and the success of her renovations made her an excellent candidate for additional financing.
Rachel prepared her application and paid the requisite fees, and her loan request was approved by Fannie Mae. She was granted a loan with a term and amortization of 30 years, aligned with the schedule of her original loan. The loan was fully amortizing, carried a fixed interest rate, and was non-recourse, thus limiting Rachel's personal liability.
The additional funds allowed Rachel to complete the enhancements to the common areas, increasing the overall appeal of the apartment complex. The improvements resulted in higher tenant satisfaction and retention, ultimately increasing the property's profitability. Thanks to the Fannie Mae Moderate Rehabilitation Supplemental Loan, Rachel was able to further improve her property and boost its value.
Please note that this is a hypothetical case study intended for illustrative purposes.