$1.41 Million Loan Closed For Two Properties In Corsicana, TX

This week, Janover Ventures’ Brandon Ramineh closed a $1.41 million Fannie Mae Small Loan for Stone Briar and Stone Ridge Apartments, two apartment properties with a combined 44 units located in Corsicana, TX. I sat down with him to discuss the deal, the Fannie Mae Small Loan program, and what borrowers should appreciate about the current state of the small-balance multifamily market.

The FHFA recently increased Fannie Mae and Freddie Mac Multifamily's loan caps to $100 billion each for the next five quarters, which could lead to even more small balance lending activity– particularly for the Fannie Mae Small Loan program.

What made this deal special?

This deal was unique because it was a scattered-site transaction, meaning that two separate pieces of property were involved in the loan. We originally tried to incorporate four properties into the transaction, but two of the properties were too small to be approved.

How was the application and approval process for the borrower?  

Fortunately, it was a relatively smooth process. Our borrower was a first-time Fannie Mae borrower, so there was a decent amount of underwriting involved, but fortunately, he did have a significant amount of multifamily experience, so the process was not too difficult overall.

What were the terms and size of the loan?

We were able to arrange a $1.41 million, 30-year fixed-rate loan with a 30-year amortization for our borrower. The interest rate was approximately 4.72%, which is quite reasonable for the market and property type. As with most Fannie Mae multifamily loans, this loan was non-recourse, which means that (in general) the lender can’t go after the borrower’s personal property if they default on their loan.

Was this transaction similar or different from the average Fannie Small Loan deal?

At a little over $1.4 million, the transaction was right in the middle of what we usually see for the Fannie Small program, which generally offers loans between $750,000 and $6 million.

What are the benefits of the Fannie Mae Small Loan program for borrowers? Is it a popular program?

Fannie Mae Small Loans have a lot of benefits, including having excellent pricing in smaller markets, like Corsica, TX, where our borrower’s property was located. In addition, these loans permit borrowers to utilize fully-amortizing 30-year financing (much like a traditional home loan), which our borrower took advantage of.

The most important terms of Fannie’s Small Loan program include:

  • LTVs up to 80%
  • 30-year amortizations
  • A variety of fixed-rate terms up to 30 years
  • Interest-only (I/O) options available
  • Closings between 45-75 days
  • Non-recourse (with standard bad boy carve-outs)

What else can you tell us about the small balance multifamily lending market? Are there any updates borrowers should know about?

Well, there’s really some great news, actually. The FHFA, which oversees Fannie Mae and Freddie Mac, recently increased the agencies’ loan caps to $100 billion each for the next five quarters (Q4 2019 to Q4 2020). That should make it even easier for borrowers to acquire small-balance multifamily debt and might also increase downward pressure on agency loan interest rates.  

There was some concern a few weeks ago, as Fannie and Freddie just raised rates and added additional restrictions for borrowers (as they had really blown threw their goals for most of 2019), but this new update should put potential agency borrowers at ease.

Aside from agency debt, CMBS loan rates are quite low right now, making CMBS a very attractive product, particularly for those borrowers who may not qualify for a loan from Fannie or Freddie. And, as always, HUD multifamily financing remains a fantastic option for well-qualified borrowers who may be able to wait a little longer for their loan to close.