Freddie Mac Bond Credit Enhancement for Affordable Property Preservation

Freddie Mac Non-Recourse Bond Credit Enhancement Financing for the Preservation of Affordable Multifamily Properties 

If you're an investor or developer interested in using tax-exempt bonds to acquire an non-LIHTC affordable property, or to substitute or refund bonds currently used to fund a non-LIHTC affordable property, Freddie Mac's Bond Credit Enhancement with Other Affordability Components could be the perfect fit. This form of bond credit enhancement offers flexible terms between 10 and 30 years, with amortizations of up to 30 years, is non-recourse, and permits both subordinate financing and eligible mixed-use properties. Plus, Freddie Mac's Bond Credit Enhancement with Other Affordability Components is designed for both fixed and variable-rate bonds, and permits LTVs of up 90% of market value and DSCRs as low as 1.25x. 



Sample Freddie Mac Terms For Bond Credit Enhancement with Other Affordability Components

Size:  Varies based on LTV and DSCR requirements. 

Uses:  Bond credit enhancement for "fixed- or variable-rate multifamily housing bonds including bond refunding, substitutions or new issue transactions with 80-20 bonds, taxable bonds in combination with tax-exempt bonds, 501(c)(3) bonds, Section 8, Section 236, or tax abatements." 

Terms:  10 to 30 years

Amortization:  Up to 30 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/1.25x 
  • Fixed-rate: 85% of adjusted value or 90% of market value/1.25x 

Eligible Properties:  Garden, mid-rise and high-rise multifamily properties with minimum occupancies of 90% for 90 days

Recourse:  Non-recourse with standard “bad boy” carve-outs

Prepayment Penalty:  Fee maintenance

Advantages:

  • Subordinate financing permitted 
  • Eligible mixed-use properties supported 

Disadvantages:

  • Appraisal, Environmental and Engineering Reports required
  • Application fee, commitment fee, credit facility fee, outside counsel fees, and other fees required