Fannie Mae Credit Enhancement of Variable Rate Tax-Exempt Bonds (Index Bonds)

Making the decision to invest in a multifamily property is a big commitment. When it comes to the financing of such a project, having experts to help guide you along the way is important. You can count on the dedicated professionals at LSG Lending Advisors to be there for you.  Regardless if your plans call for a purchase, acquisition, new construction, refinance or rehabilitation, we know that no two property projects have the same needs or challenges. Our team tailor fits our solutions to every clients’ specific requirements.  

  • Over 7 years multifamily property loan underwriting experience.
  • Expert knowledge of financial terms and principles.
  • Highly experienced at guiding clients through complex transactions.
  • In depth analysis of current operating statements and projected financials.
  • Specialists in evaluating third party reports, including appraisals, environmental documents, market studies and project capital needs assessments.
  • Loan review documentation.
  • Tailor fit financing solutions for every client.

We have partnered with some of the best FHA/HUD MAP approved lenders in the market place and have  extensive knowledge regarding adherence to FHA/HUD MAP lending guidelines. You can depend on our many years of experience to make the financing process a smooth one. Contact us today to learn more about how we can put our expertise to work for you during a multifamily property project.

The Fannie Mae Credit Enhancement of Variable Rate Tax-Exempt Bonds program supports the affordable rental housing stock with terms of 7 to 30 years with an amortization of up to 35 years. Multifamily Affordable Housing properties with at least 20% of the units set aside for low income residents are eligible. The maximum LTV is up to 85%.  

Term Sheet for Fannie Mae Credit Enhancement of Variable Rate Tax-Exempt Bonds

Term 7-30 years.
Amortization Up to 35 years.
Maximum LTV Up to 85%.
Minimum DSCR
  • 1.00x, using a DSCR calculated based on a variable underwriting rate.
  • Mortgage loan amount shall not exceed that of a fixed-rate loan of similar terms.
Variable Underwriting Rate Sum of
(i) the Stressed SIFMA Index rate, plus
(ii) the investor spread, guaranty fee, and servicing fee (the “margin”), plus
(iii) the interest rate cap escrow expressed as a percentage (if the cap term is shorter than the loan term), plus
(iv) on-going bond fees expressed as a percentage (Bond Issuer Fees, Trustee Fees, etc.).
Interest Rate Adjustments Interest rate adjusts based on the changes to the underlying Index and is equal to the Index plus the Margin. No limit on rate changes.
Index SIFMA.
Interest Rate Floor The interest rate should never be less than the margin.
Rate Lock 30-day commitments.
Prepayment
Availability
Flexible prepayment options available.
Accrual Actual/360.
Interest Rate Cap The borrower must purchase an interest rate cap from an approved interest rate cap provider. The term of the initial interest rate cap need not be equal to the term of the mortgage loan, but must be for at least 5 years. If the mortgage loan term is longer than the interest rate cap term, the borrower
must escrow monthly for the purchase of the next interest rate cap.
Issuer and Trustee Fees Loan sizing must include underwriting of the issuer and trustee fees. However, issuer and trustee fees are paid directly by borrower and are not enhanced or passed through by Fannie Mae.
Loan Documents Documented on Fannie Mae loan documents. Issuer must utilize the Fannie Mae form Indenture.
Third-Party Subordinate Financing Hard subordinate debt (which requires scheduled repayment of principal) is permitted only if provided by a public, quasi-public, or not-for-profit lender and combined debt service coverage cannot fall below 1.05x. Soft subordinate debt is permitted subject to requirements which include capping payments at 75% of available property cash flow after payment of senior liens and property operating expenses.
Recourse Non-recourse execution with standard carve-outs for “bad acts” such as fraud and bankruptcy.
Escrows Replacement reserve, tax, and insurance escrows are typically required.
Third-Party Reports

Standard third-party reports required, including:

  • Appraisal
  • Phase I Environmental Site Assessment, and
  • Property Condition Assessment.

 

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