Freddie Mac Preservation Rehabilitation Financing
Freddie Mac offers flexible financing for the moderate rehabilitation of targeted affordable properties with LIHTCs.
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 QuotesFreddie Mac Loans for the Preservation/Renovation of Affordable Properties
Borrowers interested in renovating affordable properties with new Low-Income Housing Tax Credits (LIHTCs) need look no further than Freddie Mac's Preservation Rehabilitation Loan.
Preservation Rehabilitation Loans support the acquisition, refinancing and rehabilitation of affordable LIHTC properties, particularly those that are using Bond Credit Enhancements with 4% LIHTC, Tax-Exempt Loans with 4% LIHTC, and 9% LIHTC Cash Loans. Plus, Preservation Rehabilitation Loans support property rehabilitations with tenants in place, and can support LTVs as high as 90% of a property's market value, and DSCRs as low as 1.15x, making them an incredible tool for LIHTC developers and investors.
To learn more, check out Freddie Mac’s official Preservation Rehabilitation Loan Product Sheet or keep reading below for an in-depth explanation of the Freddie Mac Preservation Rehabilitation Loan program.
Sample Freddie Mac Terms for Preservation Rehabilitation Financing in 2023
Size: Loans are based on projected post-rehab net operating income (NOI), as well as LTV and DSCR requirements. Cash or a letter of credit collateral is needed to fund the gap between the supportable amount debt based on the property's current NOI and the actual bond mortgage loan amount (collateral will be released after stabilization.)
Use:
Preservation Rehabilitation Financing can be used for the acquisition/refinancing and moderate rehabilitation of affordable properties with new Low-Income Housing Tax Credits (LIHTCs). In particular, it can be used with:
Bond Credit Enhancements with 4% LIHTC
Tax-Exempt Loans with 4% LIHTC
9% LIHTC Cash Loans
Terms:
Minimum term: Remaining LIHTC compliance period or 15 years, whichever is less; 15 years with HUD Risk Sharing
Maximum term: 35 years; rehabilitation/stabilization period (maximum of 24 months) will be included in loan term
Amortization: Up to 35 years. Loans are interest only during the rehab/stabilization period.
Tax-Exempt Financing with 4% LIHTC:
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/1.25x
9% LIHTC Cash Loan: 90% of market value/1.15x for new tax credits
Eligible Properties:
Tax-Exempt Financing with 4% LIHTC: Garden, mid-rise, or high-rise properties with new 4% Low-Income Housing Tax Credits (LIHTCs) undergoing moderate rehabilitation (must have tenants in place.)
9% LIHTC Cash Loan: Garden, mid-rise, or high-rise properties with new 9% LIHTCs undergoing moderate rehabilitation (also must have tenants in place.)
Prepayment Penalty:
Tax-Exempt Financing with 4% LIHTC: Fee maintenance
9% LIHTC Cash Loan: Yield maintenance
Advantages:
Eligible mixed-use properties supported
Offers LTVs of up to 90% of market value for some loans
Amortizations of up to 35 years
Subordinate financing is allowed
Disadvantages
- Typically requires letter of credit collateral to fund gap between supported loan amount and size of actual bond mortgage