More property investors are converting to agency loans to finance their deals. What’s driving this trend?
Financing for small apartment properties with 5 to 50 units reached a record-breaking $47.6 billion last year and growth is ongoing, according to Chandon Economics. As part of that trend, more property investors are converting to agency loans to finance their deals. What’s driving this trend?
Bank regulation and rising rates have reduced available credit from locally based traditional lending sources. At the same time, agency lending for small apartment communities has increased.
Freddie Mac Multifamily’s nationwide Small Balance Loan program has funded over $9.7 billion in small multifamily loans so far. The program fits its mission to support liquidity, stability and affordability, since small multifamily properties are a major source of affordable rental housing.
More Competitive Terms
Not only has agency lending become more abundant, it’s also become more attractive.
With a focus on providing highly competitive loan products, Freddie Mac is attracting borrowers with non-recourse terms, longer fixed-rates and more flexible prepayment options—all features that are highly desirable to borrowers in today’s lending environment. Plus, the program’s national footprint doesn’t limit borrowers to buying property in a specific regional market, which can be the case with local lenders.
Borrowers are looking for speed and, while they may not expect to find it from an agency source, that perception is being successfully challenged. It is not unheard of for Freddie Mac’s small loans to close in 30 days or less. To make that possible, the company uses a prior approval model that allows lenders to process loans more quickly.
Freddie Mac Multifamily Small Balance Loans are available through a network of approved lenders. To explore loan options, visit www.freddiemac.com/small-loans.