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ICS offers a wide variety apartment loans through a number of lenders, with the majority of our loans going to Fannie Mae. With access to over 150 wholesale loan programs, you'll find the most competitive interest rates and competitive closing costs at ICSLoans.com. Whether you are looking for long-term financing or a short term flip, we are here to help.

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The Federal National Mortgage Association (FNMA), commonly known as “Fannie Mae” offers federally guaranteed mortgages and is one of the largest multifamily loan programs in the country. Most FNMA apartment mortgages are non-recourse (except standard carve outs) and properties are underwritten using its Delegated Underwriting Services (DUS) program to make sure that lending parameters are met. Loan collateral may be traditional apartments, affordable housing, senior housing, student housing, and manufactured housing communities. Loan amounts start at $750,000 and go up with terms between 5-30 years and amortizations up to 30 years.Fannie offers both fixed and variable products for all property types and can go nationwide, although primary and large secondary markets are preferred (i.e. MSA populations of at least 200,000). There are 2 major FNMA programs under which the majority of the products fall:

Standard DUS Mortgage: The Standard DUS product is for the purchase or refinance of existing, stabilized properties including: traditional, affordable housing, senior housing, student housing, and manufactured housing communities. Properties must have a minimum of five units (50 pad sites for manufactured housing) and the Borrower must be a single-asset U.S. entity with all U.S. principals. Borrowers may also have foreign ownership interests, subject to proper structuring of the borrowing entity. Minimum loan amount is $750,000. Maximum LTV is 80% for purchases and 75% for refinances with a minimum 1.25x DSCR requirement, but this will depend on the collateral.*

Small Loan Program: The Small Loans product is for the purchase or refinance of existing, stabilized properties including: traditional, affordable housing, seniors housing, student housing, and manufactured housing communities. Properties must have a minimum of five units (50 pad sites for manufactured housing) and the Borrower must be a single-asset U.S. entity with all U.S. principals. Borrowers may also have foreign ownership interests, subject to proper structuring of the borrowing entity. Loan amount must be between $750,000 - $3 million ($5 million in eligible MSAs*). Maximum LTV is 80% for purchases and 75% for refinances with a minimum 1.25x DSCR requirement, but but this will depend on the collateral.**

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Loan Features

Term Length/Amortization: Fannie Mae loan terms range from 5-30 years with amortizations up to 30 years, depending on the type, location, and condition of the collateral. Depending on the way the loan is structured, it may “balloon” at the end of the term, meaning at the loan balance will need to either be refinanced or paid off; otherwise the loan is self-amortizing, meaning that the loan will be fully paid off when the loan matures, so there is no loan balance to pay off (unless the loan is prepaid before it matures).

Recourse: Most FNMA mortgages are non-recourse, except for standard carve-out provisions. Full recourse mortgages make the sponsors guarantying the loan responsible for any and all shortfalls between the loan balance and sales price in the event of default and foreclosure as well as any applicable legal and ancillary fees. Non-recourse means is that the Borrowers are not personally liable for the repayment of the loan and that the collateralized property and its cash flows would be the sole source of repayment of the debt in the event of a foreclosure. However, in the event the Borrower actively participates in an activity that could cause harm to the property, Lender, or investors, there could be springing recourse in some limited circumstances; this may include loan fraud, property transfer or subordinate financing without consent of the Lender, voluntary or collusive activity leading to a bankruptcy filing or failure to maintain SPE status, among other such actions.

Rate Lock: Fannie Mae has an early rate lock feature which is available with a good faith deposit, allowing the borrower to lock a rate 45 to 180 days in advance of closing. Otherwise the rate will lock 1-2 days before closing.

Loan Assumption: Fannie Mae mortgages are assumable for a 1% fee, but the new assuming borrower (i.e. Purchaser) must qualified by meeting the original underwriting standards. Typically this occurs when the Borrower wants to sell the commercial real estate that secures the loan, and the Purchaser of the property wants to take the loan over. Once the property sale and assumption is completed, the Purchaser becomes the owner of the property and is bound by the original terms of the assumed loan and the original Borrower/Seller is released from its obligation to the property and the existing loan. The benefit of this structure is that the assumption of the loan allows the Borrower/Seller to avoid defeasance or other pre-payment costs and give the buyer the opportunity to assume a loan that may have favorable terms than what is market. Loan assumption is an especially attractive option in high interest rate environments or tight credit environments.

Pre-Review Markets: The following markets require Fannie Mae Pre-Approval prior to (or at time of) issuing the loan application. In most cases, the Lender will require mortgages in these markets to be Tier 3 (65% LTV Maximum) without a waiver granted by Fannie Mae.

Prepayment Penalty Structures

Yield Maintenance: The goal of Yield Maintenance is to allow the bond investors to maintain the same yield as if the borrower made all scheduled mortgage payments until maturity. The penalty is typically calculated by a formula contained in the Note of the Loan Documents. The language will vary between different institutions, but will typically have the same two amounts to be repaid, namely: 1) The loan’s unpaid principal balance and 2) a prepayment penalty, which is typically determined by calculating the difference between the loan’s interest rate and the replacement rate (based on the US Treasury rate that most closely corresponds to the maturity date), with the remaining loan payments discounted back for the time value of money. One thing to keep in mind is that yield maintenance provisions contain a prepayment penalty “floor” of at least 1%.

Declining (Step-Down) Prepayment Penalty: A declining prepayment penalty may be structured in a variety of ways, but always has the same feature of the prepayment penalty lessening by 1% per step with the last 3-12 (or more) months open to prepay or refinance without penalty. These are usually offered on shorter-term mortgages (i.e. 5-10 years), but could potentially be offered on longer terms as well. An example of a 5 and 10 year declining prepayment penalty would be the following:

• 5 Year Declining: 5% of loan amount if prepaid in the first year, 4% if prepaid in the second year, 3% if prepaid in the third year, 2% if prepaid in the fourth year, and 1% if prepaid in the fifth year, also represented as 5-4-3-2-1% or 5% declining.
• 10 Year Declining: 5% of loan amount if prepaid in the first or second year, 4% if prepaid in the third or fourth year, 3% if prepaid in the fifth or sixth year, 2% if prepaid in the seventh or eighth year, and 1% if prepaid in the ninth or final year, also represented as 5-5-4-4-3-3-2-2-1-1% or 5% declining.

Loan Servicing:

The Fannie Mae lender or a third party may service the mortgages. The Master Servicer is responsible for day-to-day loan servicing practices including collecting loan payments, managing escrow accounts, analyzing financial statements inspecting collateral and reviewing borrower consent requests. All non-performing mortgages are usually sent to the special servicer. The special servicer is responsible for preforming customary work-out related duties including extending maturity dates, restructuring mortgages, appointing receivers, foreclosing the lender’s interest in a secured property, managing the foreclosed real estate and selling the real estate. Under some situations, master servicers subcontract some of their responsibilities to a primary or sub servicer in order to uphold the servicing standard when they need additional assistance.