Tax-Exempt Bond Credit Enhancement
We provide credit enhancement for tax-exempt bonds issued to finance the acquisition, new construction, refinancing, or moderate to substantial rehabilitation of multifamily properties.
Benefits
- Low borrowing cost, “AA+” rating keeps the interest rates on bonds low
- Supports affordable rental housing stock
- Flexible structures
- Certainty and speed of execution
Eligibility
- Multifamily Affordable Housing (MAH) properties with 4% Low-Income Housing Tax Credit (LIHTC) rent restrictions
- New money issues, refundings, or credit substitutions
Term
10 - 30 years (minimum 15 years for new construction and substantial rehabilitation).
Amortization
Up to 35 years.
Interest Rate
Fixed-rate.
Maximum LTV
90% for 4% LIHTC properties with at least 90% of the units meeting affordability requirements.
85% for 4% LIHTC properties with less than 90% of the units meeting affordability requirements.
80% for refundings.
Minimum DSCR
1.15x for 4% LIHTC properties with at least 90% of the units meeting affordability requirements.
1.20x for 4% LIHTC properties with less than 90% of the units meeting affordability requirements and for refundings.
Prepayment Availability
Flexible prepayment options available.
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.
Recourse
Non-recourse execution with standard carve-outs for “bad acts” such as fraud and bankruptcy.
Escrows
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.
Additional Considerations
The Credit Enhancement Instrument issued by Fannie Mae is provided in accordance with the terms of a Reimbursement Agreement between the borrower and Fannie Mae, among other documents.
