Unfunded Forward Commitment 4% LIHTC Properties

Build with confidence that future financing is in place

A Forward Commitment offers lower pricing and future rate certainty for new construction, or major renovation projects, utilizing 4% Low-Income Housing Tax Credits (LIHTC). Borrowers lock in an interest rate now, before construction begins, for permanent loan financing to be funded later. This provides confidence that expensive construction debt can quickly be paid off with long-term financing. Manage interest rate risk, streamline take-out financing, and build with confidence.

Competitive pricing, flexible loan structures, life-of-loan servicing, and Fannie Mae’s expertise make Unfunded Forward Commitments a powerful tool for creating new affordable rental supply.

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Future funding certainty: How Forward Commitments work

For qualifying multifamily new construction or substantial rehabilitation projects, borrowers can partner with a Fannie Mae Multifamily lender to lock in the permanent deal financing, interest rate, and deal terms before construction begins. Fannie Mae provides a Forward Commitment to enhance the bond execution once the property is completed, stabilized, and meets underwriting requirements. Our expertise and that of our lenders streamline the process.

The process:

A Forward Commitment from an experienced lender to their borrower to deliver a permanent mortgage loan at the current rate with terms customized to the borrower’s needs, upon stabilization.

A commitment from Fannie Mae to the lender to purchase the loan and issue a mortgage-backed security (MBS) once the property meets conversion.

Borrowers and lenders are both assured of future funding from a clearly defined take-out strategy.

Borrower benefits of Forward Commitments

Get permanent financing certainty and rate protection at construction and be able to plan business growth knowing you are financially covered on the current project. Benefits include:

Protection from interest rate volatility

Lock the interest rate and the deal details prior to construction with a 24- to 36-month Forward rate lock. (Rate lock up to 54 months on qualifying transactions.)

Non-recourse financing

No additional collateral is required, reducing borrower risk and improving balance sheet flexibility. There are standard carve-outs, including for misconduct like fraud or misrepresentation.

Flexible credit structure

Features include up to 40-year amortization and up to 10% tolerance increase at conversion.

Certainty and speed of execution

Fannie Mae Multifamily lenders have authority to structure and close loans.

Low minimum loan

Loan amounts can start at $3 million.

Mortgage-Backed Security (MBS) option

Visit MBS as Tax-Exempt Bond Collateral (MTEB) for more information on a Forward option with the MBS issued after project completion.

Is your deal eligible?

LIHTC projects

LIHTC new construction and properties undergoing substantial rehabilitation, including preservation and rural transactions.

Approved lenders

Lenders authorized to deliver Forward Commitments under Fannie Mae’s Multifamily Affordable Housing product line.

Additional resources

Unfunded Forward Commitment Eligibility

Watch this training video on Forward Commitment eligibility criteria.

MBS for Tax-Exempt Bonds (MTEB)

Learn how an MBS can be used as collateral to credit enhance fixed-rate bond issues.

Frequently asked questions

A Fannie Mae Multifamily Unfunded Forward Commitment is a financing tool that allows borrowers to lock in key interest rate provisions and loan terms for a future date, typically before a new construction or substantial rehabilitation project begins. This provides protection against interest rate volatility and ensures financing is secured.

The primary benefit is certainty. By locking in your financing terms and interest rate up to 36 months in advance, you can reduce market risk and proceed with your project knowing your permanent financing is secure.

Forward Commitments can be used to finance the acquisition, refinancing, new construction, or rehabilitation of 4% LIHTC multifamily properties.

Yes, which means the lender’s recovery is limited to the collateral in the event of a default, with standard carve-outs for “bad acts” like fraud.

By providing financing certainty for new construction and substantial rehabilitation, it empowers developers to move forward with projects that create new rental units or improve existing ones, directly contributing to the housing supply.

The minimum DSCR is 1.15x for properties that have greater than 90% of the units utilizing 4% LIHTC restrictions and 1.20x for properties with less than 90% of the units utilizing 4% LIHTC restrictions.

Yes, both hard and soft subordinate debt are permitted under specific conditions, allowing for flexible and layered capital stacks.

Our DUS model empowers our lending partners to make decisions, which streamlines the approval process and leads to faster, more certain execution for borrowers.