Maximum LTV/Minimum DSCR:  

• 5-7 Year Loans:

  • Amortizing: 75%/1.30x

  • Partial Term Interest-Only: 75%/1.30x

  • Full Term Interest-Only: 65%/1.40x

• 7 Year Loans:

  • Amortizing: 80%/1.25x

  • Partial Term Interest-Only: 80%/1.25x

  • Full Term Interest-Only: 70%/1.30x

• 7+ Year Loans:

  • Amortizing: 80%/1.25x

  • Partial Term Interest-Only: 80%/1.25x

  • Full Term Interest-Only: 70%1.35x

Recourse: Most loans are non-recourse with standard “bad boy” carve-out

Prepayment Options: Yield maintenance until securitization, 2-year lock-out period following securitization, defeasance allowed after securitization. Yield maintenance for securitized loans is permitted for an additional fee. No pre-payment premiums required in the last 90 days of the loan, or if the loan is refinanced with another Freddie Mac loan. 

Eligible Borrowers

• Should have 2+ years experience owning manufactured housing communities, and should currently own at least one other manufactured housing community.

• Can be a corporation, limited partnership, tenancy in common with no more than 10 members, or a limited liability company. REITs, general partnerships, some trusts, and limited liability partnerships are sometimes allowed, depending on the circumstances.

• For loans less than $5 million, borrowers can be a Single Asset Entity or a Single Purpose Entity. For loans more than $5 million, they must be a Single Purpose Entity, or SPE, (except for tenants in common, which each member must be an SPE, regardless off size).

Eligible Properties  

• Stabilized manufactured housing communities with professional management. Age restrictions allowed, but Seniors Housing Loans are not.

• Must have at least five pad sites.

• No more than 25% of homes can be rented out.

• Manufactured homes must follow HUD safety standards, and must be compliant. with the Federal Manufactured Home Construction and Safety Standards Act of 1974.

• Leases must not have the option to purchase either the pad site or a borrower owned manufactured home.

• Private wells/septic systems are permitted under certain circumstances.

• No RV resorts or broken condominiums allowed.

Sellers/Servicers:  Freddie Mac Multifamily Approved Seller/Servicers can originate/service these loans, but in general, Freddie Mac prefers seller/servicers with specific experience financing manufactured housing communities. 

Supplemental Financing:  Available 

Assumability:  Loans are assumable with lender approval, but require a 1% assumption fee paid to Freddie Mac and a $5,000 underwriting fee paid to the lender 

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

Advantages

• Very competitive interest rates

• Loans are non-recourse

• 60-120 day rate locks available, with early-rate lock, spread-lock, and index-lock options available

• Loans fully assumable (with approval and fees)

Disadvantages

• Typically requires third-party reports, including appraisal, Phase I Environmental Assessment, and physical condition assessment

• Application fees required: $2,000 or 0.1% of loan amount (whichever is larger)

• Replacement reserves required ($50/pad site per year, or $250/rented manufactured home per year, if owned by the borrower and included in the loan's collateral)

• Typically requires a loan origination fee

• Typically requires between $8,000 and $12,000 in legal fees

• Lender application fees also required (avg. of $15,000, including third-party reports, but may vary based on specific lender)

• 2% rate lock fee usually required (refunded after Freddie Mac purchases loan, usually around 30 days post-closing)

Case Study

Meet Jennifer, a seasoned investor based in Cleveland, Ohio, with a focus on affordable housing options. Jennifer recognized the growing need for affordable housing in her area and saw great potential in expanding into manufactured housing communities. She identified an attractive MHC in her region, which consisted of 75 pad sites, a playground, and a communal laundromat.

However, she was faced with the challenge of finding the right financing solution. Most traditional loan options didn't provide the flexibility and the specific terms that would make her investment in the MHC both profitable and sustainable.

That's when she discovered the Freddie Mac Manufactured Housing Community Loan. It offered competitive interest rates, flexible terms up to 10 years, and the loan was non-recourse, reducing Jennifer's personal risk.

The MHC she was interested in was on the market for $1.8 million. Using the Freddie Mac Manufactured Housing Community Loan, she qualified for a 75% LTV on a seven-year loan, which amounted to a loan of $1.35 million. The loan offered a 30-year amortization period, providing Jennifer with a manageable and predictable repayment schedule.

Thanks to Freddie Mac's Manufactured Housing Community Loan, Jennifer successfully purchased the MHC, providing much-needed affordable housing options in her local community. This investment not only generated a good return for Jennifer but also contributed positively to the local community's housing needs.

This is a fictional case study provided for illustrative purposes.

In this article:

1. Customized Freddie Mac-Insured Loans for Manufactured Housing Communities 
2. Sample Freddie Mac Terms for Manufactured Housing Community Loans in 2023
3. Eligible Borrowers
4. Eligible Properties   
5. Advantages
6. Disadvantages
7. Case Study
8. Get Financing