Fannie Mae & Freddie Mac: The Multifamily Powerhouses

For most multifamily developers, the ultimate goal is to build, stabilize, and then refinance into permanent "Agency" debt. Fannie Mae and Freddie Mac provide the liquidity that keeps the multifamily market moving, offering terms that banks simply cannot match.

Why Agency Debt?

The "Agencies" (Government-Sponsored Enterprises) don't lend directly; they buy loans originated by approved lenders (like Walker & Dunlop, Berkadia, CBRE). Their mandate is to provide liquidity and stability to the housing market.

Eligibility: The "Stabilized" Requirement

Unlike construction loans, Agency debt is for stabilized assets. Generally, this means:

• 90% Physical Occupancy for 90 days.
• 90% Economic Occupancy (paying rent).

This creates a "gap" risk. You need to finish construction and lease up using your recourse construction loan before you can take out the non-recourse Agency loan. Some lenders offer "bridge-to-Agency" products to span this period.

Small Balance Loans (SBL)

You don't need a $50 million project to access Agency debt. Both Fannie and Freddie have robust Small Balance Loan programs designed for loans between $1 million and $7.5 million.

• Streamlined Process: Lower closing costs and faster processing than conventional Agency loans.
• Flexible Prepayment: Options for step-down prepayment penalties rather than yield maintenance.
• Asset Class: Great for smaller 5-50 unit apartment buildings common in New Jersey's urban centers.

Green Financing

Both Agencies offer pricing discounts (lower interest rates) for properties that meet certain green building standards or commit to reducing energy/water consumption. In a state like NJ with high utility costs, this is a double win: lower operating expenses and cheaper debt.