Important Revisions to Multifamily Loan Document Forms Now Available on Freddiemac.com
October 1, 2013
Freddie Mac Multifamily has recently revised several of our loan document forms, including updated versions of CME, Portfolio, and Seniors Housing forms, and made them available for access on our Multifamily Loan Documents web page today. These changes were made primarily as a result of borrowers, Seller/Servicers and their counsel’s questions and feedback from document updates earlier this year.
Revised Documents Available Now but Not Required Until November 1, 2013
The updated documents may be used immediately, but we will not require their use on loans for which Freddie Mac issued the Commitment (or received the Application) prior to November 1, 2013.
Summary of Main Loan Document Changes
- The Loan Agreements now permit loans with external rate caps to be assumable. We have included standard transfer conditions for those loans to ensure the rate cap remains in place.
- If there is a condemnation but the award is not available to borrower or Lender (for example, if a third party holds this right by law or contract), the Borrower must pay down the loan in the amount necessary to keep the loan REMIC compliant. We modified the Notes to confirm that if this type of pay down is necessary, it will not be subject to a prepayment premium. This concept was included in ERLA/Commitment documents prior to this revision. We now have streamlined the language and moved it into the body of the Loan Agreement so this change no longer has to be added to the Loan Agreement.
- We made two changes that relate to repairs: (1) we extended the time period to complete long-term radon testing from 150 to 180 days, and (2) we clarified that a Borrower certificate of completion must be submitted to Lender prior to each Completion Date in the Loan Agreement, rather than only the final Completion Date.
- Our Tenancy In Common Loan Agreement Rider now includes standard modifications to the SPE provisions to account for the co-borrower structure, so these changes no longer have to be requested on a loan by loan basis.
- To ease the transfer process for Sponsors, we’ve deleted the requirement that Borrowers provide a legal opinion at the time of transfer confirming that Borrower continues to comply with the SPE requirements.
- We added the bankruptcy carve-out back into the Guaranty. The Guarantor has always had liability for a Borrower’s bankruptcy under our loan documents through the Borrower’s liability under the Note, so this is not a substantive change. The update merely makes this liability explicit/transparent in the Guaranty.
Other Minor Loan Document Changes
Most other changes are minor deletions to standardize provisions and update cross-references. The October 2013 Multifamily Loan Document Revisions chart summarizes the changes. In addition to the chart, Freddie Mac has provided Seller/Servicers’ counsel with redlined drafts showing all of
Please contact your counsel if you have any questions about these document revisions.