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Refinance Test Updated with Quarterly Market Conditions

August 25, 2011

In July, Freddie Mac released an external version of the Refinance Test to give you more transparency on our loan parameters earlier in the underwriting process. The test evaluates the borrower’s ability to successfully refinance the balloon balance of their loan at maturity. By entering the proposed parameters of a current loan, the test automatically assesses the loan characteristics in relation to current market conditions to gauge what size loan is acceptable for any deal.

To ensure market condition data is current, we update the test quarterly. The latest version of the Refinance Test has just been updated with the most current rental growth rates, vacancy rates, interest rates, and cap rate forecast.

Rent and vacancy are metro driven and trended with REIS forecasts. Expense growth is consistent with historical growth rates of 3 percent. Interest rates are forecasted with the forward curve. Payments are calculated on the forecasted 10-year Treasury rate plus 200 basis points.

We encourage you to download the latest version of the Refinance Test for use with all your loan submissions. Whenever you receive a failing result from the test, you should contact your Freddie Mac Multifamily underwriter. The underwriter will work with you to assess the individual characteristics of your deal in relation to the test results.

If you have not used the Refinance Test before, there are training materials to assist you. Please contact 800-FREDDIE [800-373-3343] with any questions about the Refinance Test.

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