What is the difference between Fannie Mae and Freddie Mac multifamily?
Both are agency multifamily lenders with broadly similar terms — 75–80% LTV, 1.20–1.25× DSCR, non-recourse fixed-rate at 5/7/10 year terms, 30-year amortization. Fannie's standard product is DUS (Delegated Underwriting and Servicing); Freddie's is Optigo. Differences: Freddie Optigo SBL has a hybrid ARM option Fannie SBL does not match. Fannie's Green Rewards and Freddie's Green Up Plus differ in efficiency-improvement requirements. Pricing typically swings 5–15 bps between them deal-to-deal — we run the file through both agencies and take the better quote.
How is multifamily DSCR calculated?
DSCR = Net Operating Income (NOI) ÷ Annual Debt Service. NOI = effective gross income (gross rents minus vacancy/concessions/credit loss) minus operating expenses (taxes, insurance, repairs, payroll, utilities, marketing, management fees, replacement reserves). Annual debt service = the new loan's P&I payments × 12. Most agency multifamily lenders want DSCR ≥ 1.25× — meaning NOI is at least 125% of the new mortgage payment. Bank lenders sometimes accept 1.20×; CMBS often requires 1.25–1.40× depending on property class.
What is non-recourse and what are the standard carve-outs?
Non-recourse means the lender's only recovery in default is the property itself — the borrower's personal assets are not at risk. "Standard carve-outs" (also called "bad-boy guaranties") create personal liability for specific borrower misbehavior: misappropriation of rents, fraud, intentional waste of the property, environmental contamination, voluntary bankruptcy filing, transferring title without lender consent. Stay clean and you stay non-recourse; commit a carve-out trigger and the lender can pursue you personally.
What is yield maintenance vs defeasance?
Both are prepayment-penalty structures designed to compensate the lender for lost interest. Yield maintenance is a calculated payment — the borrower pays the difference between the note rate and the matched-maturity Treasury, present-valued, on the prepaid balance. Defeasance is more complex: the borrower buys a portfolio of US Treasuries that produce the same cash flow as the remaining loan payments, and the loan obligation is "substituted" with that Treasury portfolio. Defeasance is the CMBS standard; yield maintenance is the agency standard. Both are expensive — typically 5–15% of the loan balance to break early in a falling-rate environment.
Can I do a cash-out refinance on a multifamily property?
Yes, but at tighter LTV than rate-and-term. Agency cash-out caps at 75% LTV (vs 80% for rate-and-term). CMBS cash-out caps at 70–75%. Bank cash-out varies — usually 70% LTV. Cash-out also adds 10–25 bps to the rate. The right structure depends on what the cash is for: stabilized refinance after value-add, deferred-maintenance funding, or sponsor distribution after a long hold.
How much down payment does a multifamily acquisition require?
Generally 20–25% on agency or CMBS (75–80% LTV). Bank financing usually 25–30%. Bridge can stretch to 80–85% loan-to-cost on the right deal. Beyond down payment, sponsors should plan for 9–12 months of operating reserves at closing, an interest reserve if the property isn't cash-flowing yet, and 2–4% of the loan amount in closing costs (origination, legal, title, third-party reports, lender legal).
How long does a multifamily loan take to close?
Agency (Fannie/Freddie SBL): 45–60 days standard, 30 days possible. Agency standard ($7.5M+): 60–90 days. CMBS: 60–90 days. Bank: 30–60 days depending on the bank's internal process. Bridge: 21–45 days. The biggest timeline drivers are third-party report turnaround (appraisal, environmental, engineering) and agency review for files above $5M. We line up third parties at term sheet so they're not the bottleneck.
What size multifamily property do you finance?
Anywhere from a 5-unit small balance ($1M loan amount minimum) up to institutional scale — $250M+ on a single asset, $1B+ portfolios. Below 5 units is residential investment (see /residential/investment). The sweet spot we close most often is 30–200 unit garden-style or mid-rise apartments at $5M–$50M loan amount, where agency and CMBS are both competitive.