October Funding

Small multifamily properties – with five to 50 units – compose a sizable portion of the multifamily rental market and much of this housing are for market rent, affordable to low-income households. The lending arena in this segment are inconsistent across lenders and regions and the secondary mortgage market has participated little compared to conventional market activities.

In line with Freddie Mac and Fannie Mae Multifamily’s mission, both entities launched the small balance loan (SBL) program focusing on loan amounts ranging from $1 million to $5 million; targeting properties with five to 50 units. Greater government-sponsored enterprise (GSE) presence in this segment will increase liquidity and stability. By structuring these loans into securities where private parties hold the first-loss position, the vast majority of the credit risk is shifted away from Freddie Mac, Fannie Mae and U.S. taxpayers.

Unknown to many borrowers who usually go to the local bank for apartment building loan. There are non-bank Freddie Mac and Fannie Mae underwriter that Essencap work with. The lending market is rather large and the loan is extremely competitive to local bank. 

Small balance multifamily lending volume in the first half of 2019 totaled $58.5 billion on an annualized basis, representing a 7.9% gain from 2018’s total.