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Freddie Mac Revolving Credit Facility
The Freddie Mac Revolving Credit Facility helps investors and developers finance large portfolios of multifamily properties, typically beginning with an initial minimum commitment of $100 million, and permitting an additional 50% of that in financing expansion.
Freddie Mac Revolving Credit Facility Financing
If you're an investor or developer who operates a large portfolio of multifamily properties, taking out an individual loan for each property may not be the most efficient use of your time. Fortunately, with Freddie Mac's Revolving Credit Facility, you don't have to.
Freddie Mac's Revolving Credit Facility is a non-recourse, revolving line of credit that allows borrowers to finance a variety of different kinds of properties, including Conventional multifamily developments, Seniors Housing, Targeted Affordable Housing developments, and Manufactured Housing Communities (MHCs).
Freddie Mac Revolving Credit Facilities have a preferred initial commitment minimum of $100 million, though this is negotiable, and allow up to 50% of that amount in financing expansion. Plus, this type of financing allows borrowers to move properties in and out of the Credit Facility without substituting other properties, and, if assets are cross-defaulted and cross-collateralized (as most are), properties are not assessed on their LTV and DSCR on an individual level, only at the level of the entire facility.
To learn more, check out Freddie Mac’s official Revolving Credit Facility Product Sheet or keep reading below for an in-depth explanation of the Freddie Mac Revolving Credit Facility Loan program.
Sample Freddie Mac Terms for Revolving Credit Facilities in 2023
Size: $100 million preferred minimum, up to 50% of commitment amount in expansion rights (i.e. $150 million maximum)
Use: Financing large portfolios of multifamily properties
Terms: 5-year interest only loans, two 1-year extension options
Interest Rates: Typically tied to the 1-month or 3-month LIBOR. Interest rate spreads locked for the life of the facility.
Interest-Rate Cap: Not required, but can be purchased through a third-party
Maximum LTV: Typically between 55% and 70%
Minimum DSCR:
DSCR requirements are determined by product type:
Conventional Multifamily: 1.45x
Manufactured Housing Communities: 1.50x
Seniors Assisted Living: 1.60x
Seniors Independent Living: 1.50x
Seniors with Skilled Nursing Facility: 1.65x
Student Housing: 1.50x
Targeted Affordable Housing: 1.40x
Uncrossed pools: +0.10
Freddie Mac Refinancing: If refinancing with a securitized Freddie Mac loan, asset release fee is waived
Sales: 1% of the loan amount; waived if new buyer uses a Freddie Mac securitized loan product
Other releases:
After year 3 of facility: 1% of the allocated loan amount
Years 1 to 3 of facility: 2% of the allocated loan amount
Very competitive interest rates
Loans are interest-only
Allows borrowers to lock in pricing before identifying properties
Since assets are cross-collateralized and cross-defaulted, there are no LTV maximums or DSCR minimums at the property level, only at the credit facility level (though not all credit facilities are cross-collateralized and cross-defaulted)
Can offer up to $150 million in financing through the life of the Credit Facility ($100 million initially)
Common ownership is not required (thus allowing for different equity structures)
Asset release fees are waived if a borrower refinances a product with a securitized Freddie Mac loan
$50,000 extension fee for each year beyond 5 years (2 extensions allowed)
Typically requires around $45,000 in legal costs
Requires commitment fee of 5 basis points
Requires property addition fee of 10 basis points
Unused commitment fee of 20 basis points is charged each year on the difference between the commitment amount and the loan amount drawn
Seasoning fee of 50 basis points charged each year for each property, beginning in the fourth year the property is being financed by the facility
Asset release fees are also charged (information above)
Other fees, including application fees, transaction fees, and mortgage review fees may also apply
Recourse: Non-recourse with standard “bad boy” carve-outs
Crossed Facilites: No LTV and DSCR requirements for individual properties, only for the entire credit facility. No minimum occupancy requirements.
Uncrossed Facilites: Properties must individually meet LTV and DSCR requirements. No minimum occupancy requirements.
Assumability: Not assumable
Asset Release Fee:
Advantages:
Disadvantages: