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Upcoming Changes to Our Interest-Only Requirements

May 9, 2012

At Freddie Mac, we continually monitor multifamily market performance and make adjustments to our credit and product parameters. We’re announcing changes today that will go into effect for loans that rate-lock on or after May 15.

We’re making changes to our interest-only requirements for both partial and full interest-only loans. Those changes will result in a 0.05 x increase in minimum debt coverage requirements for full-term interest-only loans. Additionally, we’re establishing a minimum amortization period for all partial interest-only loans to address the need for higher-leveraged loans to have a viable exit strategy at term. Going forward, we’ll require partial interest-only loans with a term greater than 5 years to have an amortizing period of 5 years. And for a partial interest-only loan with a 5-year term, we’re requiring a 4-year amortizing period. We’re making these changes to maintain prudent lending standards in today’s growing multifamily market.

We’ve updated our product term sheets to reflect these changes and encourage you to download the most recent versions to ensure you are sharing our current parameters with your borrowers.

Please contact your Freddie Mac producer if you have any questions on these changes and how they may apply to any individual transactions.

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