Fannie Mae loans have standard 5, 7, 10, and 12-year loan term options and their various loan product channels (i.e., DUS Small Loan, DUS Conventional Loan, DUS Large Loan) can accommodate transactions small and large. Depending on the execution type, maximum LTV can reach 80% for acquisitions and 75% for cash-out refinances with highly competitive pricing, non-recourse financing, and the added ability to streamline rate-lock to take advantage of favorable interest rate environments.
DUS stands for Delegated Underwriting and Servicing. This refers to a specific set of 24 lenders that are pre-approved by Fannie Mae to underwrite a loan to their standards. DUS Lenders are required to abide by Fannie Mae multifamily underwriting parameters as indicated in the Fannie Mae Underwriting Guide. Additionally, DUS Lenders must maintain certain standards when servicing a loan during the loan term. Basic requirements of servicing include ongoing debt service coverage and occupancy monitoring.This program sits on an overall principal of risk-sharing, offering delegation to lenders and an additional offering - a single-asset MBS offering for the investor community.
The Fannie Mae DUS Loan Program is the largest source of capital within the multifamily market in the United States. This program allows a group of 24 pre-approved lenders to underwrite, close, and sell multifamily loans guaranteed by Fannie Mae. In terms of risk-sharing, DUS lenders typically take one-third of the risk in the loan, ensuring that they have personal stake in the process and are motivated to analyze the credit risk of the borrower to ensure that they are suitable enough for a DUS Loan.
Fannie Mae Multifamily loans are a first-lien permanent mortgage loan, suitable for the acquisition and/or refinancing of multifamily properties.
For commercial real estate investors, the Fannie Mae DUS Loan Program may be a great option for acquiring lower costing financing for affordable housing, assisted living, mobile home parks, health care facilities, apartments, and student housing.
Fannie Mae requires the following property characteristics to be eligible for financing.
To be eligible, a property must:
Fannie Mae loans have standard 5-, 7-, 10-, 12-, and 15-year balloon and 20-, 25-, or 30-year fully amortizing loan term options and their various loan products (DUS Small Loan, DUS Conventional Loan, DUS Large Loan) can accommodate transactions small and large. Fannie Mae has both fixed rate and adjustable rate mortgages available. Depending on the execution type, maximum LTV can reach 80% for acquisitions and 75% for cash-out refinances with highly competitive pricing, non-recourse financing, and the added ability to streamline rate-lock to take advantage of favorable interest rate environments.
Additionally, other advantages of Fannie Mae Loans include:
1. The possibility to have up to 80% of tenants within multifamily properties as either students or military tenants.
2. Flexible loan terms - these loans provide borrowers with flexible terms that fit their wide range of needs. Generally, this includes amortization options for up to 30 years.
3. LTV requirements: Unlike other types of real estate that offer a much stricter loan to value ratio requirement, Fannie Mae Loans offer up to 80% maximum LTV.
4. Flexibility in Property Type: Fannie Mae Multifamily Loans can be used for properties including senior housing developments, manufactured housing communities, and other types of properties.
Fannie Mae Multifamily Loans are suitable for several property types. Eligible properties include: existing, stabilized conventional properties, multifamily affordable housing properties, seniors housing properties, student housing properties, and manufactured housing communities. Eligible multifamily properties must have at least five units.
The Fannie Mae DUS Student Housing Loan Program offers non-recourse, fixed and adjustable-rate financing for the acquisition or refinance of stabilized Student Housing properties. Within these properties, more than 40% of the units must be leased to undergraduate or graduate students.
Fannie Mae DUS loans are one of the popular loan programs for large residential properties such as senior housing. These loans are often used to finance four types of housing:
Moderate Rehabilitation mortgage loans are secured by a property that will undergo at least $8,000 of rehabilitation work per unit.
The Fannie Mae Multifamily Small Loan Program offers financing between $1 Million and $5 Million.
Mezzanine Financing and Preferred equity are financing tools that serve similar gap financing purposes. Both of these tools are a blend of debt and equity, providing the investor with higher leverage at a lower cost than common equity.
Fannie Mae conventional loans are mortgages for market rate apartment communities with a total loan balance greater than $6.5MM. These loans are for the acquisition or refinance of multifamily projects nationwide.
There are currently 24 Fannie Mae DUS lenders in operation, with top lenders including Walker & Dunlop, CBRE, Berkadia, Wells-Fargo, Greystone, Newmark, JLL, Capital One, Keybank, and Arbor. These partners take roughly one third of the risk in the loan in order to ensure that they have responsibility in the transaction.
Partners take on life-of-loan servicing, meaning there is no other master or servicer involved in the process and the post-closing period runs seamlessly.
The Fannie Mae Multifamily DUS MBS is a single-asset MBS with a single loan as support for the collateral. It is not in an overall securitization - this means that the investor and borrower are tied from the initial stages of underwriting, closing, and issuing of the security until the end.
This process includes three key stakeholders: the borrower, the lender, and Fannie Mae. Fannie Mae strictly guarantees loans on multifamily properties with a minimum of five units. This product allows for customized loan structures, a risk-sharing model, and loan terms of varying prepayment periods and lengths.