Taxable Tails: Flexible Lending for Affordable Housing
Financing to support more multifamily housing nationwide.
Taxable Tails offer a streamlined way to help bridge the gap between tax-exempt bond financing and total project costs. By bringing tax-exempt and taxable financing together in one coordinated transaction, borrowers can simplify execution and unlock additional financing to support more affordable rental housing.
Close financing gaps with one coordinated execution
Increase proceeds
Access debt beyond the tax-exempt bond allocation.
Simplify execution
Complete one underwriting, due diligence, and closing process.
Comprehensive pricing
Receive the same guaranty fee and servicing fee for both loans.
How it works
For eligible Multifamily Affordable Housing properties, an approved DUS® Lender structures the tax-exempt financing and Taxable Tail together. Fannie Mae evaluates the combined debt using the same property cash flow, collateral, and applicable underwriting requirements.
Select an eligible MBS as Tax-Exempt Bond (MTEB) or Credit Enhancement Instrument (CEI) execution.
Determine the gap between supported debt and available tax-exempt bond proceeds.
Identify remaining net cash flow for Taxable Tail loan sizing.
Underwrite, rate lock, close, and deliver both pieces of debt as a coordinated transaction.
Common scenarios
A Taxable Tail supports additional debt beyond what tax-exempt financing or available equity will cover.
Bond allocation constraints
Tax-exempt bond proceeds are limited by volume-cap availability conditions. A Taxable Tail adds taxable financing when the property supports additional debt.
Low-Income Housing Tax Credit (LIHTC) equity gap
Equity pricing or investor demand provides less equity than expected. A Taxable Tail narrows the remaining financing gap.
Capital stack efficiency
The borrower adds eligible debt as part of the initial transaction, potentially reducing the need and cost of a future supplemental loan.
Which execution could be right for your deal?
MTEB + MBS Taxable Tail
Fannie Mae provides credit enhancement for tax-exempt bonds through MTEB, while the Taxable Tail is delivered as a mortgage-backed security (MBS) mortgage loan. The combined debt is sized together and has the same loan term.
CEI + Taxable Tail
Fannie Mae provides a CEI for tax-exempt bonds, and the Taxable Tail may be structured as one of the following:
- Credit enhancement for taxable bonds.
- MBS mortgage loan.
Both structures, MTEB + Taxable Tail and CEI + Taxable Tail, use combined underwriting and require the tax-exempt and taxable loans to be originated, rate locked, closed, and delivered together.
Minimum Taxable Tail amount required: $1 million, regardless of the execution type.
Explore more resources
Frequently asked questions
Review common questions and answers to understand more about Taxable Tails and how to use them in your affordable financing deals.