Updated Refinance Test Available for Loans Not Rate Locked by April 2nd (Now April 16th)
March 19, 2012
Important Notice as of 3/30/12
Freddie Mac has corrected technical issues with the Refinance Test since we first published this article on March 19. Please use this new version for any loans in process that have not been rate locked by April 16. This resolves accessibility issues that some Seller/Servicers were experiencing; it will not change any results. The dates and links below have been updated accordingly.
Updated Refinance Test Effective April 16
Freddie Mac is providing an updated version of the Refinance Test to reflect the most current multifamily market conditions including forecasted rental growth rates, vacancy rates, interest rates, and cap rates.
Changes to the Forecasts Used in the Refinance Test
When using this updated Refinance Test, in some instances you may see changes in the test results based on more constraining forecast inputs. We believe most transactions will be unaffected, however, as the changes are most pronounced in a handful of our most challenged markets that are not showing economic strength and for shorter term (5 and 7-year) loans and those with interest only, or some combination of these factors.
Using the Results of the Refinance Test
As always, when a loan does not pass the test, this is simply an indicator for you to discuss the parameters sooner with your underwriter. It does not necessarily mean, Freddie Mac will not buy the loan.
This test gives you transparency on our loan parameters earlier in the underwriting process. It 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.
Resources for Your Reference
See our Refinance Test Customer Tutorial in the Resources section of our recently redesigned Multifamily website for additional guidance on the use of the test and evaluation of its results.