Credit Enhancement of Variable Rate Tax-Exempt Bonds (Index Bonds)

Credit enhancement for variable-rate tax-exempt bonds issued to finance the acquisition, new construction, refinancing, or moderate to substantial rehabilitation of multifamily properties. These bonds have no put feature and therefore no liquidity fees.

Term Sheet (PDF)


  • Low borrowing cost, “AA+” rating keeps the interest rates on bonds low
  • Supports affordable rental housing stock
  • Flexible structures
  • Certainty and speed of execution


  • Multifamily Affordable Housing properties
  • Multifamily properties in which at least 20% of the units are set aside for low income residents (also known as "80/20" deals)
  • Bond terms up to 30 years
  • Refundings or new issues
  • Newly constructed or rehabilitated and stabilized 4% LIHTC with tenant-in-place rehab component


7 - 30 years.


Up to 35 years.

Maximum LTV

Up to 85%.

Minimum DSCR

1.00x, using a DSCR calculated based on a variable underwriting rate.

Mortgage loan amount shall not exceed that of a fixed-rate loan of similar terms.

Variable Underwriting Rate

Sum of

(i) the Stressed SIFMA Index rate, plus

(ii) the investor spread, guaranty fee and servicing fee (the “Margin”), plus

(iii) the interest rate cap escrow expressed as a percentage (if the cap term is shorter than the loan term), plus

(iv) on-going bond fees expressed as a percentage (Bond Issuer Fees, Trustee Fees, etc).

Interest Rate Adjustments

Interest rate adjusts based on the changes to the underlying Index and is equal to the Index plus the Margin. No limit on rate changes.



Interest Rate Floor

The interest rate should never be less than the Margin.

Rate Lock

30-day commitments.

Prepayment Availability

Flexible prepayment options available.



Interest Rate Cap

The Borrower must purchase an interest rate cap from an approved interest rate cap provider. The term of the initial interest rate cap need not be equal to the term of the Mortgage Loan, but must be for at least 5 years. If the Mortgage Loan term is longer than the interest rate cap term, the Borrower must escrow monthly for the purchase of the next interest rate cap.

Issuer and Trustee Fees

Loan sizing must include underwriting of the Issuer and Trustee Fees; however, Issuer and Trustee Fees are paid directly by borrower and are not enhanced or passed through by Fannie Mae.

Loan Documents

Documented on Fannie Mae loan documents. Issuer must utilize the Fannie Mae form Indenture.

Third-Party Subordinate Financing

Hard subordinate debt (which requires scheduled repayment of principal) is permitted only if provided by a public, quasi-public, or not-for-profit lender and combined debt service coverage cannot fall below 1.05x. Soft subordinate debt is permitted subject to requirements which include capping payments at 75% of available Property cash flow after payment of senior liens and Property operating expenses.


Non-recourse execution with standard carve-outs for “bad acts” such as fraud and bankruptcy.


Replacement reserve, tax, and insurance escrows are typically required.

Third-Party Reports

Standard third-party reports required, including Appraisal, Phase I Environmental Site Assessment, and Property Condition Assessment.