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Quarterly Update to the Refinance Test

June 20, 2012

Freddie Mac is providing our quarterly update to the Refinance Test to reflect the most current multifamily market conditions including forecasted rental growth rates, vacancy rates, interest rates, and cap rates. We routinely evaluate the refinance test and publish quarterly updates as needed.  Please begin using this new version of the Refinance Test for all new deals effective immediately, including deals in progress that are not yet rate-locked.

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.

The Refinance 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 its 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 Originate & Underwrite Program Plus Resources section of our website for additional guidance on the use of the test and evaluation of its results.

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