Structured Adjustable Rate Mortgage (ARM)

Having an expert by your side to help you navigate a multifamily or healthcare property lending transaction can play a very important part in achieving a successful outcome. You can depend on the experts at LSG Lending Advisors to be your advocates during every step of the process. If your plans call for securing a loan for a purchase, acquisition, new construction, refinance or rehabilitation, we are ready to put our years of experience and knowledge to work for you. We take the time to get to know each of our client’s specific business needs and create custom fit financing solutions for them.   

  • 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 can guide you in adhering to all FHA/HUD MAP/LEAN lending guidelines, as well as help connect you to some of the best FHA/HUD approved lenders in the industry. Give us a call today to learn more about how we have helped so many clients with their Multifamily/Healthcare property lending needs.

Fannie Mae Structured ARM (SARMs) offers low-cost financing that has an adjustable rate that can be converted to a fixed rate.

Eligible properties that are existing, stabilized conventional properties are:

  • Multifamily Affordable Housing properties, 
  • Seniors Housing properties, 
  • Student Housing properties, and 
  • Manufactured Housing Communities.  

The terms are fixed for 5, 7, or 10 years with a 30-year amortization.

Term Sheet for Fannie Mae Structured ARM

Term 5, 7, or 10 years.
Amortization Up to 30 years.
Interest Rate Adjustments Interest rate adjusts based on changes to the underlying index and is equal to the index plus the margin. No limit on rate changes.
Maximum LTV 75%.
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.
Rate Lock 30-day commitments.
Supplemental Financing Supplemental loans are available.
Prepayment Availability After a one-year lock-out period, loans may be voluntarily prepaid. Lender selects the option of a declining prepayment premium or a 1% prepayment premium. No prepayment premium required during the last 3 months of the loan term. When refinancing into a fixed-rate product with Fannie Mae, the prepayment premium may be waived under certain conditions.
Variable Underwriting Rate

Sum of

(i) the index, 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) 3%, plus

(v) the amortizing constant for that built-up rate.

Index

1 or 3 month LIBOR.

Interest Rate Cap
  • Structured ARMS have no built-in periodic or lifetime caps. Instead, 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.
Interest Rate Floor The interest rate shall never be less than the margin.
Conversion to Fixed Rate

Loans have a conversion feature whereby the interest rate may be converted to a 7- or 10-year fixed rate loan on any rate change date beginning with the first day of the second year and end on the first day of the third month prior to maturity, provided the loan has not been delinquent during the previous 12 months and the borrower is not in default under any loan document.

  • No prepayment penalty charged at the time the SARM converts to a fixed rate.
  • Minimal re-underwriting. Lender determines that the current net cash flow can support the new fixed-rate terms.
  • No increase in the loan amount. Loan may be eligible for a supplemental loan.
Accrual Actual/360.
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.
Assumption Loans are typically assumable, subject to review and approval of the new borrower's financial capacity and experience.

 

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