Agency Loans

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Fannie Mae & Freddie Mac Multifamily Loans

A Practical Guide for Commercial Mortgage Brokers

1. What Are Agency Multifamily Loans?

Fannie Mae and Freddie Mac are government-sponsored enterprises (GSEs) that provide liquidity to the multifamily housing market. They do not lend directly to borrowers—instead, they purchase or guarantee loans originated by approved agency lenders.

Core Characteristics

  • Non-recourse (with standard carve-outs)

  • Long-term fixed or floating rates

  • Competitive pricing vs banks

  • Designed for stabilized multifamily properties

  • Focused on 5+ unit residential assets

Agency loans are considered permanent financing, not bridge or construction debt.

2. Fannie Mae Multifamily Loans – How They Work

Eligible Properties

  • Market-rate multifamily (5+ units)

  • Affordable housing

  • Senior housing (independent living)

  • Student housing (select programs)

  • Manufactured housing communities

Common Fannie Mae Loan Programs

  • DUS Conventional (most common)

  • Small Loan Program

  • Affordable Housing / Mission-Driven

  • Green Rewards (energy/water efficiency)

Fannie Mae Underwriting Basics

  • Focus on DSCR stability

  • Conservative view of income and expenses

  • Strong preference for seasoned ownership and management

Typical underwriting metrics:

  • DSCR: ~1.25x

  • LTV: Up to ~80% (lower for cash-out)

  • Amortization: Up to 30 years

  • Term: 5–30 years

Fannie Mae Strengths

  • Slightly more flexible on property condition

  • Popular for larger, institutional-quality assets

  • Well-established underwriting standards

3. Freddie Mac Multifamily Loans – How They Work

Eligible Properties

  • Market-rate multifamily

  • Affordable housing

  • Seniors housing

  • Student housing

  • Manufactured housing communities

Common Freddie Mac Loan Programs

  • Conventional

  • Small Balance Loans (SBL)

  • Targeted Affordable Housing (TAH)

  • Green Advantage

Freddie Mac Underwriting Basics

  • Slightly more execution flexibility

  • Often competitive on pricing and leverage

  • Efficient securitization model

Typical underwriting metrics:

  • DSCR: ~1.25x

  • LTV: Up to ~80%

  • Amortization: Up to 30 years

  • Term: 5–30 years

Freddie Mac Strengths

  • Highly competitive Small Balance Loan (SBL) platform

  • Efficient closing process for repeat borrowers

  • Attractive pricing on stabilized assets

4. Small Balance vs Standard Agency Loans

This distinction is critical for brokers.

Small Balance Loans (SBL)

Loan size:

  • Typically ~$1M to ~$7.5M (varies by program and market)

Target borrower:

  • Small to mid-sized investors

  • Less institutional ownership

  • Simpler property profiles

Key characteristics:

  • Streamlined underwriting

  • Faster execution

  • Slightly higher interest rates than standard deals

  • Less customization

SBLs are ideal for:

  • 5–50 unit properties

  • Secondary and tertiary markets

  • Borrowers transitioning from bank loans

Standard / Conventional Agency Loans

Loan size:

  • ~$7.5M+ (often much larger)

Target borrower:

  • Experienced operators

  • Larger or institutional assets

Key characteristics:

  • Fully tailored underwriting

  • Best pricing for strong assets

  • More detailed diligence

  • Longer processing timelines

5. DSCR, LTV, and How Loans Are Sized

Agency loans are constrained by both DSCR and LTV.

DSCR Mechanics

DSCR = Underwritten NOI ÷ Annual Debt Service

  • Minimum DSCR is typically ~1.25x

  • NOI is normalized (management fees, taxes, vacancy)

LTV Mechanics

LTV = Loan Amount ÷ Appraised Value

Whichever constraint is tighter controls the loan size.

Many agency deals are DSCR-constrained, not value-constrained.

6. Pricing & Spreads (How Brokers Should Think About It)

Agency pricing is typically quoted as:

Treasury Rate + Spread

Typical Spread Ranges (General Guidance)

(Exact pricing varies by market, leverage, asset quality, and timing)

Program Typical Spread Range
Freddie SBL ~200–300 bps
Fannie Small Loan ~210–310 bps
Freddie Conventional ~170–260 bps
Fannie DUS ~180–270 bps

Spread drivers include:

  • Loan size

  • LTV

  • DSCR strength

  • Market liquidity

  • Borrower experience

  • Green or affordable incentives

Green Programs (Pricing Advantage)

Both agencies offer pricing reductions for energy-efficient properties.

  • Lower spreads

  • Higher proceeds

  • Strong competitive edge for brokers

7. Fannie Mae vs Freddie Mac – Broker Comparison

Category Fannie Mae Freddie Mac
Loan Type Permanent Permanent
Recourse Non-recourse Non-recourse
DSCR ~1.25x ~1.25x
LTV Up to ~80% Up to ~80%
Small Balance Platform Good Excellent
Large Loans Excellent Excellent
Pricing Very competitive Very competitive
Green Programs Green Rewards Green Advantage
Closing Speed Moderate Often slightly faster
Broker Preference Larger assets SBL & repeat borrowers

8. Common Broker Mistakes with Agency Loans

  • Assuming seller NOI = lender NOI

  • Ignoring tax reassessment risk

  • Overestimating SBL flexibility

  • Submitting unstabilized properties

  • Underestimating timing (agency ≠ quick close)

Broker Takeaways

  • Agency loans are the gold standard for stabilized multifamily

  • DSCR discipline matters more than leverage

  • Small Balance ≠ easier underwriting—just streamlined

  • Pricing is driven by risk, not relationships

  • Strong packaging separates average brokers from agency specialists

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