Uses:

• Forward Commitment: Provides bond credit enhancement for LIHTC properties post-construction or substantial rehab

• Immediate Funding: For the acquisition, refinancing, or credit substitution of LIHTC properties

• Preservation Rehabilitation: Intended for properties with tenants in place undergoing moderate rehabilitation

Terms:  

• Forward Commitment and Immediate Funding:

  • Minimum term: Remaining LIHTC compliance period or 15 years, whichever is less

  • Maximum term: 35 years

• Preservation Rehabilitation:

  • Minimum term: Remaining LIHTC compliance period or 15 years, whichever is less

  • Maximum term: 35 years

*Rehabilitation/stabilization period (24 months maximum) is included in the loan term for preservation rehabiliation   

Amortization:  Up to 35 years 

Interest Rate:  Fixed and floating-rate options available 

Interest-Rate Caps:  Required 

Maximum LTV/Minimum DSCR: 

• Variable-rate with cap hedge: 80% of adjusted value or 85% of market value/1.20x

• Fixed-rate: 85% of adjusted value or 90% of market value/1.15x

 Eligible Properties: 

• Forward Commitment: To-be-built or substantially rehabilitated garden, mid-rise, or high-rise properties with 4% LIHTC

• Immediate Funding: Garden, mid-rise, or high-rise properties with 4% LIHTC (must maintain 90% occupancy for 90 days, and at least 7 years must be remaining in LIHTC compliance period)

• Preservation Rehabilitation: Garden, mid-rise, or high-rise properties with 4% LIHTC undergoing moderate rehabilitation with tenants in place

Construction Loans: Maximum forward commitment term of 36 months plus a free 6-month extension during construction period

Prepayment Penalty:  Fee maintenance

Specific Funding Information: 

• Forward Commitment:

  • Bond credit enhancement is available during construction phase (funded forward commitment)

  • A letter of credit collateral is required during construction phase

  • Forward commitment to provide bond credit enhancement is available upon successful conversion of the property from the construction phase to permanent phase (unfunded forward commitment)

• Immediate Funding: Bond credit enhancement for fixed- or variable-rate tax-exempt bonds

• Preservation Rehabilitation:

  • Bond credit enhancement for acquisition/rehabilitation is based on projected post-rehabilitation net operating income (NOI)

  • Cash or letter of credit collateral is needed to fund the gap between supportable debt on the current NOI and the bond mortgage loan amount (collateral held until stabilization)

  • Interest-only financing is available during the rehabilitation/stabilization period

Advantages:

• Subordinate financing permitted

• Eligible mixed-use properties supported

• Deals with new 4% or 9% LIHTC can be underwritten to DSCRs as low as 1.15x

Disadvantages:

• Application fee, commitment fee, credit facility fee, and other fees are required

In this article:
1. Freddie Mac Bond Credit Enhancement for 4% LIHTC Properties
2. Sample Freddie Mac Terms for Bond Credit Enhancement With 4% LIHTC in 2023
3. Get Financing