Recent underwriting changes at the Agencies has resulted in additional cash requirement on all multi-family deals.

You can expect the following as a result of these changes:

1.  Multifamily transactions under $6 million will specifically be more difficult due to larger cash escrows.  Instead of injecting 20% plus some level of closing costs, expect cash requirements to be as high as 30%.  This additional cash requirement will reduce the number of buyers in the market, particularly where investors rely on smaller down payments.  

2.  FNMA: Loans $6,000,000 and up will be required to provide 12 months for principal and interest reserves as well as escrow reserves.  Taxes and insurance escrows also total to 12 months.  Additional cash to close is approximately 7% greater.

     FNMA: Loans under $6,000,000 will be required to have 18 months of reserves available. Taxes and insurance escrows total to 12 months.  Additional cash to close is approximately 10% greater.
      FNMA: With a DSCR of 1.35 or higher and LTV of 65% or lower, FNMA will only require 6 months of reserves

3.  Freddie Mac:

  • Debt Service Reserves Requirements
    • Conventional – A 6-9-month debt service reserves are required, regardless of due diligence.  
    • For a loan sized to a minimum 1.40x amortizing DCR or greater, irrespective of the actual interest-only period of the loan, the debt service reserves amount will be 6 months amortizing debt service.
    • For a loan sized to an amortizing DCR below 1.40x, irrespective of the actual interest-only period of the loan, the DSR amount will be sized to 9 months of amortizing debt service.
    • TAH – Cash preservation follows DSR guidelines set for Conventional; other products will be structured as appropriate for that individual deal.  
    • SBL – 12-months debt service reserves are required for all loans. We have extended the lender repurchase period to at least 18 months.


Though spreads are on the wide side due to the low 10 year Treasury at .65% range, rates are historically in the low range, except for life insurance companies’ floors maintaining rate levels in the 3.50% range for longer term money, but lower leverage points at 65% LTV.  Here are various rate levels:
1.  HUD rate is 2.48% fixed for 35 year money.  MIP adds additional 60 bps
2.  FNMA 65% LTV is 3% to 3.3%; 75% to 80% LTV is 3.3% to 3.8%, depending on loan size.
3.  FREDDIE MAC pricing is approximately 30 basis points higher, depending on location.

HUD SPREADS:  Spreads in January and February were in the 140 basis point range when the treasury was in the 1.6 range.  In March after a rapid decline in the 10 year Treasury to present levels, spreads increased to approximately 200 basis points.

Always feel free to reach out to us with any questions regarding rates, loan sizing and underwriting nuances.  Stay safe and have a great day!

Scott Taccati
Trillium Capital Resources