Freddie Mac Multifamily Launches Two New Mortgages for Acquisition Upgrade and Rehabilitation
October 16,
2007
Contact:
corprel@freddiemac.com
or (703) 903-3933
McLean, VA – Freddie Mac (NYSE: FRE) announces two new products for borrowers seeking to finance both the acquisition and upgrade or rehabilitation of existing multifamily properties. The Freddie Mac Acquisition Upgrade MortgageSM provides financing for cosmetic improvements, while the Freddie Mac Acquisition Rehabilitation MortgageSM is available for more substantial improvements that allow borrowers to reposition properties in their respective markets. These new products provide funds for both the purchase and upgrade or rehabilitation of the property in one first lien mortgage.
"A lot of acquisition deals involve new owners/operators who want to renovate. Now, with one mortgage and one lender, a qualified borrower can obtain funds to both purchase and upgrade or rehabilitate an existing multifamily property, maximizing cash flow through upfront financing," said Mitchell Kiffe, vice president of Multifamily Sourcing for Freddie Mac. "These new products are part of our strategy to better meet borrower needs and be more competitive in the marketplace."
Freddie Mac Acquisition Rehabilitation Mortgage
For the Acquisition Rehabilitation Mortgage the total repair cost must be a minimum of $10,000 per unit but must not exceed the lesser of $30,000 per unit or 30 percent of acquisition cost. With this product, the rehabilitation is expected to have a higher impact on new stabilized rents, enabling the borrower to fully reposition the property, perhaps for a different customer base. Borrowers will be able to finance a higher percentage of their total project costs, because the size of their loan is tied to a percentage of loan-to-purchase, which has an upper limit of 90 percent. Items generally permitted in the scope of work under the Acquisition Rehabilitation Mortgage include, upgrades to interior and/or exterior finishes to units and/or common areas; new kitchen and/or bathroom cabinets and/or fixtures; new boilers or significant parts replacement; new roofing; new brick pointing; and parking lot resurfacing.
Freddie Mac Acquisition Upgrade Mortgage
This product is for cosmetic improvements, or light rehabilitation, which could include deferred maintenance items. The total repair cost must be a minimum of $3,000 per unit but must not exceed the lesser of $10,000 per unit or 20 percent of acquisition cost. This product offers borrowers financing of up to 86 percent loan-to-purchase and 80 percent loan-to-cost. An Acquisition Upgrade Mortgage is subject to the same requirements as the Acquisition Rehabilitation Mortgage except that the work to be done is cosmetic in nature and is generally limited to upgrades to interior and/or exterior finishes to units and/or common areas; and new kitchen and/or bathroom cabinets and/or fixtures.
Additional benefits include:
- Reduced interest-rate risk through the Freddie Mac Early Rate-Lock delivery option.
- Clearly defined lending parameters and predictable rate-lock and closing timeframes.
- Guaranteed permanent financing, since the acquisition and upgrade or rehabilitation funds are funded at the same time.
Since the launching of Freddie Mac's current multifamily business in 1993, Freddie Mac has purchased more than $165 billion in multifamily mortgages, financing rental housing for more than four million families.
Freddie Mac is a stockholder-owned corporation established by Congress in 1970 to support homeownership and rental housing. Freddie Mac purchases single-family and multifamily residential mortgages and mortgage-related securities, which it finances primarily by issuing mortgage-related securities and debt instruments in the capital markets. Over the years, Freddie Mac has made home possible more than 50 million times, ensuring financing for one in six homebuyers and more than four million renters.
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