Agency Debt (Fannie Mae / Freddie Mac)

Agency Debt: What the Market Actually Requires

Fannie Mae and Freddie Mac do not lend directly. Fannie Mae operates through DUS lenders that share risk on each loan and hold delegated underwriting authority; Freddie Mac originates through its Optigo network and securitizes loans into K-series deals. For borrowers the products feel similar: non-recourse loans on stabilized multifamily with five or more units, fixed or floating rate, terms from five to thirty years, up to 30-year amortization, leverage to roughly 80 percent, and sizing against a DSCR floor that typically starts at 1.25x and rises for riskier profiles. Interest-only periods are available and expand as leverage drops.

The agencies' mission orientation creates real pricing advantages. Loans on properties with affordability components, rents serving mission-defined income bands, or green certifications can earn meaningful pricing benefits, and both agencies run small-balance programs with streamlined execution for loans in the lower millions. Supplemental loans let borrowers add proceeds after seasoning without refinancing the first mortgage, and assumability makes agency debt a genuine selling point when the property trades.

What agency debt will not do is fund transition. The programs want stabilized occupancy, usually 90 percent physical occupancy sustained for a defined period, and in-place income that covers the sizing tests. Heavy value-add plans route to bridge debt first, then refinance into agency at stabilization, which is the standard multifamily lifecycle. The other structural boundary: hard mezzanine debt behind an agency loan is generally prohibited, so sponsors who need more leverage use preferred equity structured to agency requirements. Escrows for taxes, insurance, and replacement reserves are standard, and prepayment is typically yield maintenance or defeasance until an open window near maturity.

Why It Matters for Your Loan

For stabilized multifamily, agency debt is usually the proceeds and pricing benchmark every other quote must beat, with non-recourse terms and liquidity that persists even when banks retreat. Its constraints, including stabilization requirements, prepayment rigidity, and subordinate debt limits, define deal sequencing for most multifamily investors. Commercial Lending Solutions structures the full lifecycle, bridge for acquisition and renovation, then the agency takeout at stabilization, and knows which lender programs and mission pricing tiers a given property can actually reach.