New Targeted Affordable Housing Offering: Bridge to Resyndication
September 1, 2015
We’re delighted to announce our latest product—Bridge to Resyndication. This offering will provide our customers efficient, short-term financing (a taxable acquisition bridge loan) to help them acquire or refinance Low-Income Housing Tax Credit (LIHTC) eligible properties. The loan will be for 24 months (with one 6-month extension with approval), interest-only, and with a floating rate.
The funding will be a much-needed bridge for borrowers that will position properties for recapitalization using 4% LIHTCs and long-term Freddie Mac financing, such as our Direct Purchase of Tax-Exempt Loans.
Who Is Eligible?
Highly experienced LIHTC developer/owners who have successfully completed multiple resyndications using 4% LIHTC and tax-exempt bonds.
What Properties Are Eligible?
Target properties are stabilized properties with LIHTC eligible rent levels and evidence of LIHTC eligible tenancy. Most will be LIHTC properties at or nearing the end of their compliance period. Construction must be sound but buildings will often require moderate repair. Typically, the only construction activity completed during the loan term would be any required life safety repairs and deferred maintenance. However, underwriting will validate the ability to complete all necessary repairs as part of the LIHTC takeout.
Other requirements include evidence that a public agency with authority to issue Volume Cap Mortgage Revenue Bonds has sufficient bond availability to meet the allocation needs of the anticipated LIHTC takeout and has a highly predictable process for that allocation. A rider to the mortgage will include specific performance benchmarks needed to achieve the resyndication takeout along with interim dates to achieve them. Examples would include: final plans and specs for rehab, bond inducement, and commitment from an LIHTC investor. Failure to achieve these benchmarks will trigger a right to sweep all cash flow to an escrow account where these funds could be held as additional collateral or be used to commence principal curtailment.
Why Is This Product Important?
It helps us meet the needs of our customers.
Our clients have told us they need efficient short-term capital to acquire or refinance LIHTC properties at the end of their compliance period. Once a LIHTC property reaches the end of its initial compliance period, owners often need short-term financing to buy out their Limited Partners, pay various tax related exit expenses and position the property for resyndication. Though renovations are planned, owners have to delay most of this work until the closing of the LIHTC transaction to preserve the cost basis for the LIHTC subsidy. We listened to this market feedback, understood the need and created a streamlined financing structure to bridge LIHTC owners to a 4% LIHTC/tax-exempt permanent recapitalization.
And it helps Freddie Mac fulfill its mission.
This offering is another way we’re expanding our business and innovating to support the preservation of affordable housing. Properties financed through this offering fall into “uncapped” business volume as defined by the Federal Housing Finance Agency.
Rollout of this offering follows a successful pilot where we provided a Bridge to Resyndication for a 366-unit affordable property in Fresno, CA, which will be taken out with a Freddie Mac Tax-Exempt Loan as part of a 4% LIHTC recapitalization.
Whom Do I Contact?
Call your Freddie Mac Targeted Affordable Seller/Servicer for more information on our Bridge to Resyndication and your other financing needs for affordable multifamily housing.
Learn more about our other Targeted Affordable Housing initiatives.