Fannie Mae Moderate Rehabilitation Loans
Fannie Mae Moderate Rehabilitation Loans are intended for the moderate rehabilitation of apartment and multifamily properties. They are non-recourse, have five- to 30-year terms, and permit LTVs up to 80%.
Better Financing Starts with More Options$1.2M offered by a Bank at 6.0%$2M offered by an Agency at 5.6%$1M offered by a Credit Union at 5.1%Click Here to Get QuotesFannie Mae Moderate Rehabilitation Financing for Multifamily Developments
If you're a developer or investor who currently owns (or wants to purchase) a property that needs a moderate amount of renovations, a Fannie Mae Moderate Rehabilitation Loan could be the loan product you've been looking for. Fannie Mae Moderate Rehabilitation Loans have terms of between 5 and 30 years, and flexible amortizations of up to 30 years, and, they even allow supplemental financing through Fannie Mae's Moderate Rehabilitation Supplemental Loan program. Plus, these loans have an LTV allowance up to 80%, are non-recourse, and are fully assumable with lender approval.
Sample Fannie Mae Terms For Moderate Rehabilitation Loans in 2023
Size: $10 million+
Use: Acquisition or refinancing of conventional multifamily properties with at least $10,000 of planned improvements per unit
Terms: 5, 7, 10, and 15-year balloon loans available, 20, 25, and 30-year fully amortizing loans
Amortization: Up to 30 years, interest-only loans are available
Interest Rates: Fixed and adjustable-rate loans available. Fixed-rate loans are based off associated Treasury Bill, while adjustable-rate loans are based off the 30 or 90-day LIBOR rate.
Maximum LTV:
Up to 80% of the lesser of the property's:
Stabilized appraised value
Purchase price (if purchased in the last 12 months) + value add during renovation + 3% closing costs
Minimum DSCR: 1.25x
Recourse: Loans are non-recourse with standard “bad boy” carve-outs
Rehab Requirements: Property improvements must average at least $10,000/unit
Timing: Borrower will typically receive a commitment 45 to 60 days after initial application; third-party report timing and borrower due diligence submission may speed up or slow down the process
Eligible Borrowers: Borrowers must typically be U.S.-based single asset entities
Prepayment: Options include yield maintenance, defeasance, and declining prepayment premiums
Origination Fees:
1% of the loan amount for loans $9 million or less
0.8% of the loan amount or $90,000 (whichever is greater) for loans more than $9 million
Origination fees typically continue to decrease as loans become larger
Assumability: Loans are fully assumable with lender approval and 1% fee. May also require an additional fee paid to the lender (usually around $3,000)
Other Considerations:
Borrowers must sign a Completion Repair Guaranty covering the entire scope of the required rehabilitation work
If repairs for the project are more than or equal to $20,000/unit, a Rehabilitation Work Evaluation Report is required
Borrowers must submit a Rehabilitation Work Schedule detailing the scope of the planned work, including costs, dates, and allowances for potential cost overruns
Borrowers must also create and submit a budget for the planned work, and place funds into a Rehabilitation Reserve Account
Advantages:
Competitive interest rates
Loans are non-recourse
Lower cost than refinancing
Not subjected to Fannie Mae's "one supplemental loan" rule
Loans are fully assumable (with approval and fees)
Disadvantages:
Requires third-party reports including a Property Condition Assessment, Appraisal, and Phase I Environmental Assessment
$25,000 application fee typically required (includes third-party reports and underwriting costs)
$15,000- $20,000 in legal fees also typically required
Rate locks only available after commitment
Origination fees required