Freddie Mac has amended several measures that were put in place last year to maintain liquidity and stability throughout the COVID-19 pandemic and its related economic uncertainty. The update comes after what Steve Lansbury, SVP of Underwriting & Credit at Freddie Mac Multifamily, describes as “positive signs of recovery in both the broader economy as well as the multifamily market” and a portfolio that has “demonstrated strong metrics with respect to occupancy and collections.”
Below is a summary of the changes, which are effective immediately and apply to all loans currently in process that have not yet rate locked.
Conventional & Targeted Affordable Housing (TAH)
- Elimination of the programmatic Debt Service Reserve (DSR) requirement for most loans. A DSR is still required for Seniors Housing, Student Housing, and pre-stabilized assets – though the DSR sizing on those products has been reduced to six months of debt service.
- The -5% LTV adjustment on cash-out refinances has been removed.
Small Balance Loans
- The DSR is still required on SBL acquisition loans, but has been reduced to six months.
- Less restrictive adjustments have been applied for DSR waiver eligibility.
Freddie Mac also announced that they will review the markets most significantly impacted by COVID-19 to assess if data trends warrant future improvements in their market ratings.
All in all, this is positive news for the industry and a sign that things are moving back towards normalcy. Please do not hesitate to reach out for additional information on these changes or if you have any questions on how this update might impact your current financing needs.
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