Freddie Mac 9% Low-Income Housing Tax Credit Mortgages

Freddie Mac provides competitive permanent financing for the acquisition or refinance of apartments that are subsidized with 9% low-income housing tax credits. Freddie Mac’s purchase of loans secured by stabilized 9% low-income housing tax credit properties is one of several initiatives to help increase the supply of rental housing affordable to families with low incomes.

Eligible Loans

Loans secured by properties receiving 9% housing credits on at least 40% of the property’s residential units. Underwriting standards will depend on the remaining term of the housing tax credits. Forward Commitments for properties benefiting from low-income housing tax credits are eligible under Freddie Mac’s Affordable Forward Commitment product.*

Eligible Properties

• Stabilized garden, mid-rise, or high-rise apartments that have received a 9% tax credit allocation under Section 42 of the Internal Revenue Code
• Properties with other state and federal subsidies will be considered
• Properties must demonstrate via a market study that they provide an affordability advantage within the market

Eligible Borrowers

Partnerships (general or limited), corporations or limited liability corporations. For-profit and certain qualified nonprofit entities are eligible.

Eligible Seller/Servicers

Freddie Mac-approved Multifamily seller/servicers

Minimum Loan Amount

$300,000

Maximum LTV

• 85% of value if tax credits extend at least seven years beyond the loan closing date. (90% with HUD risk sharing)
• 80% of value for all other eligible transactions

Minimum DCR

• 1.15x if tax credits extend at least seven years beyond the loan closing date, (1.10 with HUD risk sharing)
• 1.25x for all other eligible transactions

Loan Terms

• Minimum of the lesser of 18 years or the remaining term of the tax credit compliance period plus three years
• Maximum of 30 years. Mortgages with terms of 20 years or more must be self-liquidating

Maximum Amortization Period

30 years. Not eligible for interest-only.

Prepayment Provisions

Prepayable in full, subject to applicable yield maintenance premium

Subordinate Debt

• Soft subordinate debt:
  • Debt service cannot exceed 75% of cash flow after payment of operating expenses, reserves, escrows and senior debt
  • Combined LTV may exceed 100%
    
    
• Hard subordinate debt:
  • Combined debt service ratio may not be less than 1.10x
  • Combined LTV may not exceed 90%

Supplemental Mortgages**

Freddie Mac may place a supplemental mortgage on an existing Freddie Mac first mortgage or originate a first and supplemental mortgage at the same time.

Recourse Requirements

Nonrecourse except for standard carve-out provisions

Minimum Occupancy

90% for 90 days

Appraisal, Environment, Architectural and Market Feasibility Reports

Required. Freddie Mac will consider using an original market feasibility report prepared prior to construction on a case-by-case basis.

Tax and Insurance Escrows

Required

Transfers/Assumptions

Transfers/assumptions allowed during life of loan with Freddie Mac’s approval.

Application Fee

The greater of $3,000 or 0.1% of the maximum loan amount

Servicing Fee

Sliding scale based upon actual loan amount

Pricing

• Risk-based pricing
• Borrower can choose 30/360 or actual/360 interest calculation
• On-the-run U.S. Treasuries used

Early Rate-Lock Delivery Option***

Available

* See our fact sheets on Affordable Forward Commitments for details.
** See our fact sheet on Supplemental Mortgages for details.
*** See our fact sheet on the Early Rate-Lock delivery option for details.