Freddie Mac Single-Family Rental (SFR) Pilot Program
Seeing the need for a product that can provide a financing option for single family rental home portfolios, Freddie Mac is testing out a new loan product called the Single-Family Rental Pilot Program. Since nearly 40% of renters lease single-family residences (i.e. structures with 1-4 units), Freddie wanted to provide a source of financing for owners of affordable single family rental homes that have exceeded the threshold of individual home loan allowances.
| Loan Features/Characteristics | |
| Recourse | Non-recourse, except standard “bad boy” carve-outs |
| Prepayment Penalty | Yield Maintenance or Step-Down |
| Loan Servicer | Minimum of 0.25%, based on loan size |
| Application Fee | 0.10% of loan amount |
| Reserves | Taxes, insurance, and HOA |
| Capital Reserves | Required |
| Due Diligence | All 3rd party due diligence reports must be from Freddie’s approved vendor list. |
| Property Requirements | |
| Property Type | SFRs (1-4 units) with permanent C/Os; (no MFH, condos, or co-ops) |
| Affordability | 75% of SFRs must have affordable rents or are at 80% or below of AMI; waivers considered for mission-based or nonprofit strategies. Loans where only 51%+ of SFRs are affordable at 80% AMI or below, will be considered on an exemption basis. |
| Location | Nationwide, but each MSA in a loan portfolio must have at 5+ homes |
| Loan Amount | $5,000,000 minimum |
| Financials | Operating Statement and Rent Roll required quarterly |
| Management | 3rd party manager required (or company affiliated with Borrower with contract in place); replacement manager needs pre-approval from Lender. |
| Valuation | Recent appraisals (within 6 months) must account for a minimum of 30% of the SFRs, with at least 15 appraisals. Valuations for the remaining homes are determined at Freddie Mac’s discretion. |
| Collateral | All properties will be cross-collateralized and 100% of Borrower interest in the holding SPE will also be pledged. |
| Release | Standard release provisions, including 115% payment and applicable prepayment premiums. |
| Borrower Requirements | |
| Structure | Single Purpose Entity (SPE) that owns at least 50 SFR homes |
| Experience | At least 5 years experience of owning and managing required |
| Underwriting Requirements | |
| Term Length | 5, 7, or 10 years |
| Max LTV/LTC | 70% (5 yr), 75% (7-10 yr) OR 80% (including rehabilitation costs) |
| Max Amortization | 30 years |
| Min DSCR | 1.30x (5-7 yr), 1.25x (10 yr) |
| Interest Rate | Fixed |
