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Important Changes to Our Interest-Only and Partial Term Interest-Only Credit Policy

October 10, 2012

At Freddie Mac, we continually monitor multifamily market performance and make adjustments to our credit and product parameters. We're announcing changes that will go into effect immediately for all loans that are not under application by the end of today, October 10. These changes include:

  • Increased the minimum loan term from 5 to 7 years for loans with partial term interest-only payments.
  • Increased the minimum number of years of amortizing payments from 5 to 7 years (6 years allowed for a 7-year acquisition loan).
  • Increased the DCR adjustment for full term interest-only loans from .10 to .15 (from 1.35x to 1.40x).

The following chart outlines the specific credit parameters that now apply to all loans not under application by the end of today, October 10 and any going forward:

5 Year Loans7 year Loans10 Year Loans
No partial IO No partial IO for refinances
1-Year Partial IO for acquisitions
Up to 3-year partial IO
Full Term IO Requires 60%
LTV/1.45 amortizing DCR
Full term IO requires 65%
LTV/1.40 amortizing DCR
Full term IO requires 65%
LTV/1.40 amortizing DCR

Eligibility Rules

The following chart outlines the eligibility requirements for grandfathering loans under the existing interest-only policy, for those that are under application by the end of today, October 10:

Date Under ApplicationQuote RefreshRate-Lock Commitment DateStandard Rate Lock
By 10/10/2012Prior to 9/15/2012By 11/15/2012 
Must be under application by Wednesday,
October 10
All quotes issued prior to Saturday, September 15 must be refreshed under the new IO policy guidelines The loan must be rate-locked or had the commitment issued by Thursday,
November 15.
Only loans with a standard rate-lock are eligible for grandfathering. Extended rate-locks are not eligible.

Additional IO Exceptions

Some exceptions may be made on a regional basis, depending upon quality of asset and the market. Talk to your producer to determine if you are eligible for an exception.

We are in the process of updating our product term sheets to reflect these changes and encourage you to check our website later this week 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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