FNMA: Fannie Mae Mortgage Association in Commercial Real Estate

What is FNMA in Commercial Real Estate? 

FNMA, or Fannie Mae Mortgage Association, is a U.S. government sponsored enterprise that is focused on expanding housing opportunities across the United States. To do so, it purchases residential mortgages from lenders and securitizes, or pools them, into mortgage-backed securities. While Fannie Mae does not offer direct commercial real estate loans, investors can rent a certain amount of commercial space if they use a FNMA loan to purchase a multifamily property. 

For example, apartments purchased with a Fannie Mae DUS loan are permitted to have up to 35% of their property's space occupied by commercial tenants, or derive 20% of the property's income from commercial sources (whichever is less).

Popular Fannie Mae Multifamily Loans 

Some of the most popular kinds of Fannie Mae multifamily loans include: 

  • Fannie Mae DUS Loans: The most popular multifamily loan program offered by Fannie Mae, the DUS program allows for loans of $3 million or above. 
  • Fannie Mae Multifamily Small Loans: These multifamily loans are sized between $750,000 and $5 million, and offer streamlined underwriting and documentation requirements. 
  • Fannie Mae Affordable Housing Loans: This program, with a minimum loan size of $1 million, is designed especially for properties using the Section 8 Housing Assistance Program (HAP), projects with expiring LIHTC tax credits, or projects using other, specific, affordable housing arrangements. 
  • Fannie Mae Senior Housing Loans: These loans, which have a minimum loan size of $5 million, are available to independent living, assisted living, and Alzheimer’s/Dementia care projects for senior citizens. 

Fannie Mae Multifamily Loan Terms 

While terms can vary significantly with different loan products, most Fannie Mae Multifamily loans have the following terms: 

  • Leverage: Maximum 80% LTV 
  • DSCR: 1.15-1.30 minimum DSCR 
  • Recourse: Non-recourse, standard carve-outs apply 
  • Loan Term: 5-30 years 

Freddie Mac Also Insures MultiFamily LoanS 

In addition to Fannie Mae, its brother corporation, Freddie Mac, also purchases and insures multifamily mortgages, including some that allow for a degree of commercial property use. For example, properties purchased with a Freddie Mac Small Balance Loan (SBL), can derive up to 40% of their income from commercial rents.