Small Balance Loan

Financing for the acquisition

or refinance of small balance
loans (SBLs), providing
liquidity, stability, and
certainty of execution to the
affordable rental housing
market nationwide

Key Benefits
Financing of small balance loans using hybrid ARM or fixed-rate
mortgage products, offering partial-term and full-term interest-only
Streamlined processes during pricing, underwriting, closing and
funding
Competitive pricing

Streamlined loan documents

At-a-Glance
Small Balance Loan Options and Requirements
Eligible Sellers/Servicers
Freddie Mac-approved Small Balance Loan Seller/Servicers
Markets
Nationwide
Loan Amount
$1 million to $5 million
Loan Purpose
Acquisition or refinance
Loan Terms
20-year hybrid ARM with initial 5-, 7-, or 10-year fixed-rate period
5-, 7-, or 10-year fixed-rate mortgage
Amortization
Up to 30 years
Interest Only
Partial interest-only; full-term interest-only may be available
Prepayments
Declining schedules and yield maintenance available for all loan types; defeasance
available for fixed-rate loans onlyplease refer to the chart on page 3
Third Party Subordinate
Permitted subject to certain restrictions; combined loan-to-value (LTV) ratio cannot
Financing
exceed 80% or go below combined debt-service coverage ratio (DCR) of 1.25x
Eligible Borrowers/
Individuals who are US citizens; limited partnerships; limited liability companies;
Borrowing Entities
Single Asset Entities (SAE); Special Purpose Entities (SPE); tenancy-in-common
(TIC) with up to five unrelated members; and Trusts (irrevocable trusts and revocable
trusts with a warm body guarantor)
Recourse
Non-recourse with standard carve-out provisions required
Net Worth and Liquidity
Net worth: Equal to the loan amount
Liquidity: Equal to 9 months of principal and interest
Eligible Properties
Conventional multifamily housing with five residential units or more, including
conventional housing with tax abatements and Section 8 vouchers
Ineligible Properties
Seniors housing, student housing (greater than 25% concentration), military housing
(greater than 25% concentration), Targeted Affordable Housing, properties with
LURAs, and cooperative housing
Occupancy
Minimum 90% average physical occupancy required over trailing 3-month
underwriting period
Replacement Reserves
Underwritten at $200, $250, or $300 based on property condition per the Small Loan
Physical Risk Report (Form 1104)
Escrows
Real estate tax escrow deferred for deals with an LTV ratio of 65% or less
Insurance escrow deferred
Replacement reserve escrow deferred
Rate-Lock
60- to 120-day rate-lock period available
For a list of Freddie Mac Seller/Servicers and other product information, visit FreddieMac.com/multifamily
The information in this document is not a replacement or substitute for information found in the Freddie Mac Multifamily Seller/Servicer
Guide.
Terms set forth herein are subject to change without notice.

April 2015

Small Balance Loan, contd

Fixed-Rate/Hybrid ARM LTV Ratios and Amortizing DCRs

Minimum
Amortizing DCR
1

Top SBL Markets

2
Secondary and All Other SBL
Markets
All Full-Term Interest-Only

Maximum LTV

1.20x

80%

1.25x

80%

1.40x

65%

In secondary SBL markets, a minimum DCR of 1.20x is permitted with Freddie Mac approval.

The DCR calculated for the full-term interest-only uses an interest-only payment at the fixed interest rate.

Top SBL Markets by Metropolitan Statistical Area (MSA)*

Metro Area

State

New YorkNewarkJersey City

NYNJPA

BostonCambridgeNewton

MANH

PhiladelphiaCamdenWilmington

PANJDEMD

WashingtonArlingtonAlexandria

DCVAMDWV

ChicagoNapervilleElgin

ILINWI

Los AngelesLong BeachAnaheim

CA

San FranciscoOaklandHayward

CA

San JoseSunnyvaleSanta Clara

CA

San DiegoCarlsbad

CA

Secondary SBL Markets by MSA*

Metro Area

State

BaltimoreColumbiaTowson

MD

DenverAuroraLakewood

CO

MinneapolisSt. PaulBloomington

MN-WI

PortlandVancouverHillsboro

OR-WA

SacramentoRosevilleArdenArcade

CA

SeattleTacomaBellevue

WA

Salt Lake City

UT

*http://www.bea.gov/regional/docs/msalist.cfm

The information in this document is not a replacement or substitute for information found in the Freddie Mac Multifamily Seller/Servicer Guide.
Terms set forth herein are subject to change without notice.

April 2015
Page 2

Prepayment Provisions
All prepayment options are open for prepayment without penalty 3 months prior to maturity. See Freddie Mac SBL Notes
for details.
Fixed-Rate

Hybrid ARMs

5-Year

7-Year

10-Year

5- + 15-Year

7- + 13-Year

10- + 10-Year

Option 1

54321

5544321

5544332211

54321, 1%

5544321, 1%

5544332211, 1%

321(3)

3(2)2(2)1(3)

3(3)2(3)1(4)

321(3), 1%

3(2)2(2)1(3), 1%

3(3)2(3)1(4), 1%

YM

YM

YM

YM, 1%

YM, 1%

YM, 1%

Defeasance

Defeasance

Defeasance

--

--

--

Option 2
Option 3
Option 4
4

Hybrid ARM consists of initial fixed-rate period followed by a floating-rate period. Floating-rate coupon is based on 6 month LIBOR + 275 margin.
During the floating-rate period, rate is reset every 6 months with a maximum 1% change at each reset. The rate has a lifetime floor equal to the
initial fixed-rate and a lifetime cap of 5% over the initial fixed rate.
5
Prepay description: e.g., 321(3), 1% refers to 3% for year 1, 2% for year 2, 1% for 3 years, and then 1% during the remaining floating-rate period.
6
Higher of yield maintenance (YM) or 1% during fixed-rate period; 1% during floating-rate period.
7
Defeasance is available only for fixed-rate loans.

For More Information

David Cardwell, Director, at (703) 714-3244 or david_cardwell@freddiemac.com

Annie Gong, Production Manager, at (703) 714-2754 or annie_gong@freddiemac.com
Marc Batchelor, Production Manager, at (703) 714-4941 or marc_batchelor@freddiemac.com

Joyce Judah, Production Senior, at (312) 407-7390 or joyce_judah@freddiemac.com

Steve Malloy, Production Analyst, at (703) 714-3506 or steven_malloy@freddiemac.com