Freddie Mac Low-Income Housing Tax Credit (LIHTC) Enhancement
Freddie Mac LIHTC Enhancement Provides Foreclosure Protection for Investors
If you're an LIHTC investor for an affordable property that's being financed with a Freddie Mac Bond Credit Enhancement, a Freddie Mac Tax-Exempt Loan (TEL), or a Freddie Mac TAH Cash Loan, and are looking for an added degree of financial security, Freddie Mac's LIHTC Enhancement program could be a fantastic choice. The LIHTC Enhancement program protects LIHTC investors in the case of foreclosure by providing a make-whole payment based on the investor's initial contribution, in exchange for paying a quarterly fee to Freddie Mac. LIHTC Enhancements are available for financially strong borrowers with significant experience in 80/20 (i.e. 80% market-rate, 20% affordable) or other types of mixed-income properties, and last for a term of 10 years.
To learn more, check out Freddie Mac’s official LIHTC Enhancement Product Sheet or keep reading below for an in-depth explanation of the Freddie Mac LIHTC Enhancement program.
Sample Freddie Mac Terms For LIHTC Enhancement
Size: Varies based on LTV and DSCR requirements.
LIHTC Enhancements protect LIHTC investors in the case of foreclosure, which is available for properties funded with Freddie Mac financing including Bond Credit Enhancement, Tax-Exempt Loans (TELs), or TAH Cash Loans.
If Freddie Mac forecloses on a loan with LIHTC Enhancement, the investor will receive a make-whole payment equal to the amount of their initial investment, but not including the amount of their tax credit.
Freddie Mac must be paid a fee for the LIHTC Enhancement
Term: 10 years
Eligible Properties: Newly developed and stabilized high-rise and mid-rise mixed-income properties, 80/20s, or similar projects
Eligible Borrowers: Financially strong 80/20 developers with significant experience in the applicable market
Occupancy Requirement: The property must be fully stabilized with qualified low-income tenants
Protects LIHTC investors in the case of foreclosure
Requires quarterly fees based on risk
Additional documentation is typically required, including annual K-1s (documents reporting every shareholder's share of income, losses, deductions and credits) and reports documenting the property's performance and compliance with the LIHTC agreement