COVID-19 Updates for our Multifamily Business

june 2021 updates

We’ve updated the COVID-19 Debt Service Reserve (DSR) Release FAQs pdf by adding questions #24 and #25.

Please reach out to your Freddie Mac representative if you have any questions.

MAY 2021 UPDATES

We’ve shared the most recent COVID-19 Debt Service Reserve (DSR) & Credit Changes - Conventional, TAH pdf and have updated the COVID-19 Debt Service Reserve (DSR) Release FAQs pdf with additional frequently asked questions.

MARCH 2021 UPDATES

We're approaching the one-year mark for some loans with COVID-19 Debt Service Reserves (DSR). To help lenders handle release requests, we've created the following resources:

• COVID-19 DSR Release Overview - Conventional and Specialty pdf
• COVID-19 DSR Release FAQs pdf

If you have any questions or concerns, please reach out to your Freddie Mac representative.

JUNE 2020 UPDATES

The impact of COVID-19 and the economic uncertainty it brought added new challenges. But the credit mitigation efforts we put in place earlier this year have served us well, and the market trends are providing valuable information as we move forward.

With three months of data on multifamily operations, we are rolling back our temporary +0.05x DSCR adder for cash-out refinances for Conventional and Targeted Affordable Housing loans. Seniors Housing and Small Balance Loans will continue with the DSCR adder for the time being.

We will reassess the temporary -5% LTV adjustment in the future once we begin to see more complete data running through the appraisal reports. For deals on the edge of the credit box, we will base decisions on the stability of the most recent three months’ collections, as well as other criteria.

MAY 2020 UPDATES

Debt Service Reserve

This week we issued new loan agreement provisions stating that the DSR can be released after 12 months, even if federal, state, or local restrictions are still in place, so long as outstanding due diligence requirements and asset-level performance tests are satisfied. We are hopeful this change provides a clear path forward for our borrowers and lessens ambiguity surrounding DSR releases for our Optigo® network.

• For loans currently in process – new loan agreement provisions to be included in commitments as of Tuesday, May 26.
• For loans that have rate locked or committed but not yet closed – Optigo lender counsel have now received a form amendment letter drafted and circulated by Freddie Mac Legal earlier this week. The form amendment provisions can be included with other amendments required in the ordinary course, and also include corrections to Schedule 1 breakage provisions in the 5-18-2020 form of commitment.
• For loans that have closed – rather than amending individual loans, we intend to incorporate the changes in Freddie Mac’s treatment of DSR releases through updates to our securitization documents that will require the servicer to interpret the release conditions as set forth in the revised DSR riders. Freddie Mac will apply the same servicing standard for portfolio loans.

Loan Agreement Provisions

For loans currently in process – there are new loan agreement provisions to be included in commitments as of Tuesday, May 26.

For loans that have rate locked or committed but not yet closed – Optigo lender counsel have now received a form amendment letter drafted and circulated by Freddie Mac Legal earlier this week. The form amendment provisions can be included with other amendments required in the ordinary course, and also include corrections to Schedule 1 breakage provisions in the 5-18-2020 form of commitment.

For loans that have closed – rather than amending individual loans, we intend to incorporate the changes in Freddie Mac’s treatment of DSR releases through updates to our securitization documents that will require the servicer to interpret the release conditions as set forth in the revised DSR riders. Freddie Mac will apply the same servicing standard for portfolio loans.

Financing Updates

These changes are effective Monday, May 18, and apply to our Conventional, Seniors Housing and Targeted Affordable Housing (TAH) Cash Preservation, 9% LIHTC and 4% Tax-Exempt Loans.

Index Locks

We’re pleased to reintroduce our Index Lock option for fixed-rate loans. Please note the following Index Lock exclusions:

• Seniors Housing, Student Housing, supplemental loans
• Unstabilized products: Lease-up, Moderate Rehab
• First-time sponsors

Debt Service Reserves (DSR)

• Effective for commitments issued beginning May 14
• The DSR for full-term interest-only (IO) loans will be calculated on an IO basis, not an amortizing basis
• The DSR will be waived for low leverage loans defined as 60% LTV/1.45x DCR, subject to collections trend

April 2020 updates

Loans with Declining Rents

We are committed to maintaining liquidity in this evolving market. So, as conditions change, we continue to review and update our approach to due diligence and loan sizing to keep capital flowing while ensuring the safety and soundness of our lending decisions.

Given the rapid decrease in rental income some properties are exhibiting, we are updating our guidelines for all loans being quoted or under application as of today. These guidelines specify case-by-case reviews of current property performance to determine the impact of any decrease in rental income. This is applicable to all products, including Conventional, Seniors Housing, Targeted Affordable Housing and Small Balance Loans, and it applies to those loans currently under application.

Please see the attached summary of our underwriting guidelines pdf and contact your Freddie Mac representative for more information.

Debt Service Reserve Update

We’ve made a few clarifications to our April 8 Debt Service Reserve (DSR) announcement:
A DSR is required on all TAH deals — nine months if below 1.40x DCR, or six months if 1.40x DCR or greater.

Assuming complete full due diligence (per the Freddie Mac Multifamily Seller/ServicerGuide), the following transaction types may not require a DSR:

• Properties with HAP contracts that cover 100% of units with a contract term greater than or equal to the loan term, provided that the annualized HAP payments alone (assuming no tenant rent or commercial income) support breakeven operations
• Properties with eight years remaining on the initial 15-year Low-Income Housing Tax Credit compliance period:
  • An unlimited guaranty of operating expenses or deficits is in place at closing, or
  • A limited guaranty of operating expenses or deficits and an operating reserve are in place at closing (or with respect to the operating reserve, will be funded within six months)
    • Limited guaranty must equal to at least six months of operating expenses.
    • Operating reserve must be funded in an amount at least nine months of amortizing debt service.

In each instance, for a term satisfactory to Freddie Mac.

• Unfunded Forwards prior to conversion

As always, please do not hesitate to reach out to your relationship managers with any concerns or questions.

Forbearance Documents

In response to further developments with COVID-19 and the requirements of the CARES Act, we have updated our forbearance documents. You can find the latest version on our Asset Management webpage under the Asset Management References tab.

We specifically addressed questions regarding the Small Business Administration (SBA) loans in the COVID-19 Forbearance Program FAQs pdf. The questions include:

Q: Would the borrower obtaining a loan pursuant to the Paycheck Protection Program (PPP) disqualify the borrower from forbearance?

A: No. Neither a PPP loan nor a $10,000 grant/advance under the Economic Injury Disaster Loan (EIDL) program automatically disqualifies the borrower from forbearance, but the Borrower must still comply with the underlying loan document requirements.

• Under the Conventional program, SPE restrictions will likely prohibit a borrower from obtaining even an unsecured PPP loan without prior lender consent. Borrowers should consult their lenders regarding specific facts and circumstances.
• We anticipate limited participation of SPE borrowers in the PPP since availability of funding under the PPP is based upon historical payroll expenses of the borrower and payroll expenses for multifamily properties tend to be a smaller portion of a borrower’s expenses.
• For existing loans, a PPP loan or any other SBA emergency relief loan that is secured by the Mortgaged Property (such as an EIDL) requires the prior written consent of the lender to avoid a default under the loan documents.
• Non-SPE entities in the ownership structure, or manager affiliates of the borrower may freely pursue both SBA grants and loans (secured or unsecured) without prior lender consent so long as any collateral provided for the SBA loan doesn’t include any asset covered by the Freddie Mac loan or a security interest in the ownership interests of the Freddie Mac borrower.

Please refer to the FAQs document pdf for additional details. Although the FAQs document attempts to provide reliable, useful information, any information or analysis shared in this document is provided for informational purposes only. Optigo® lenders and borrowers must make their own determination as to the appropriate information and resources to use in order to satisfy their obligations under the applicable loan documents, laws and regulations. If you have any questions, please contact your Freddie Mac representative.

Debt Service Reserve Required for All Loans

As part of our commitment to safely maintain liquidity and stability throughout all economic cycles, we are continually evaluating market conditions and adjusting our business to address evolving conditions. In light of this, we are now requiring a Debt Service Reserve (DSR) for all loans that have yet to be committed. As will be more particularly described in the loan documents, the reserve will be released once the COVID-19 crisis emergency declarations are lifted, full due diligence is confirmed and the property is performing. For Conventionalloans, a six- to nine-month DSR is 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 DSR amount will be six 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 nine months of amortizing debt service.

If you have any questions, please reach out to your Freddie Mac representative.

march 2020 updates

Legal Update

The American Land Title Association (ALTA) is tracking the operating status of recording jurisdictions around the country based on reports from ALTA members, colleagues, and State/Regional Land Title Associations. You may access ALTA’s Recording Jurisdiction Operating Status Report here: https://www.alta.org/business-tools/coronavirus.cfm.

Business Update

Freddie Mac is fully engaged in addressing changing market conditions and is working to ensure you are kept updated. If you have any questions about the update below, please reach out to your Freddie Mac Multifamily representative.

With market turbulence intensified by public health news and the oil fight, Treasurys continue to reach new lows, and we are committed to serving our mission.  As you’ve likely read, recordation and closing agencies are starting to report closures. We are working with our Optigo® lenders, legal teams, title companies and closing offices to determine potential resolutions.

• We previously implemented a suspension of Index Locks on specialty products, but due to current industry issues, all Index Locks and early-rate locks have been temporarily paused for all products as we evaluate the market and our offering. Please see the update below for full details.
• Treasury floors are now the greater of 0.75% or 15 bps below current Treasury for all products, except supplementals.
• We’re also adding a Treasury floor of 0.75% on all supplementals, regardless of loan term.
• First quotes issued are valid for five business days instead of 10, and subsequent quotes will remain unchanged at five business days.
• We are no longer waiving good faith deposits for Select Sponsors.
• Beginning with commitments that are issued tomorrow, we are eliminating the cap in the Breakage Fee formula for fixed-rate loans; breakage will now be calculated without the 2% cap. As always, Freddie Mac will pursue the borrower for any breakage fee that is above the good faith deposit.

In response to public health concerns, we’re seeing many organizations move to flexible work arrangements, and Freddie Mac is doing the same and leveraging technology to maintain business functions seamlessly.

Index Lock

Freddie Mac is taking a pause on Index Lock Agreements. Effective immediately, Freddie Mac hereby with this communication rescinds and revokes each and every Index Lock Agreement (ILA) that has been issued by Freddie Mac to an Optigo® lender that has not yet been signed and uploaded to the Document Management System (DMS) by the Optigo lender, in accordance with Section 1 of the ILA.

For those transactions other than student housing, seniors housing, lease-up, and supplemental loans, we currently intend to reissue a new ILA as soon as reasonably practicable, if the Optigo lender requests it.

Every ILA that has been accepted and received by Freddie Mac via DMS as of the time of this email will remain in full force and effect and will be processed in accordance with our then-current business practices when we resume our Index Lock activity.

Additionally, effective immediately, Freddie Mac will no longer interest rate lock any Early Rate Lock Application (ERLA) that has not yet been signed and uploaded into DMS by the Optigo lender. We currently intend to reissue revised ERLAs as soon as reasonably practicable when we resume our early-rate locks.

Thank you for your understanding of these changes. We appreciate your continued partnership — and your business — as we navigate this extraordinary situation together.

NOVEMBER 2021 UPDATES

Effective November 2, Freddie Mac Multifamily eliminated the COVID-19 debt service reserve (DSR) for all SBL Loans. Read more here.

JUNE 2021 UPDATES

We’ve updated the COVID-19 Debt Service Reserve (DSR) Release FAQs pdf by adding questions #24 and #25.

Please reach out to your Freddie Mac representative if you have any questions.

MAY 2021 UPDATES

We've shared the most recent COVID-19 Debt Service Reserve (DSR) Changes - SBL pdf and updated the COVID-19 Debt Service Reserve (DSR) Release FAQs pdf with additional frequently asked questions.

MARCH 2021 UPDATES

SBL Markets of Concern

The following change is effective for all loans taken under application on or after March 8, 2021.

The COVID-19 pandemic has affected rents and vacancies across the country, especially in large urban cities. Kings County, one of the five boroughs of New York City, has experienced one of the worst declines in effective asking rent in the apartment sector since the start of the pandemic. In order to mitigate continued rent declines in the market, increase transparency and reduce uncertainty in underwriting loans in Kings County, Freddie Mac Small Balance Loans (SBL) is adding Kings County to the current list of Markets of Concern:

Markets of Concern

1. New Orleans, Louisiana
2. Orlando, Florida
3. State of Nevada
4. Kings County, NYC (new addition)

Freddie Mac SBL requires a 0.05x increase in Debt Service Coverage Ratio (DSCR) and a 5% reduction in loan-to-value (LTV) thresholds for all loans located in a Market of Concern.

For loans in Kings County only, a prescreen with the SBL production team will not be required prior to issuing an application. However, if a Kings County property includes any of the following characteristics, Freddie Mac SBL will require an additional 0.05x increase in DSCR and a prescreen with the SBL production team 2 weeks prior to underwriting package submission to Freddie Mac:

1. Property constructed within the last 3 years at the time of underwriting package submission to Freddie Mac, with the start date being the date the Certificate of Occupancy was issued;
2. Newly leased-up/stabilized property within the last 3 years of underwriting package submission to Freddie Mac, defined as property with an occupancy at 25% or below during a rehab or renovation period.

At prescreen, please provide a current rent roll, the latest loan sizing and a transaction narrative. For newly leased-up/stabilized properties, please also provide a historical occupancy statement indicating monthly occupancy throughout the past three years.

We will continue to monitor all Markets of Concern for improvements to determine if they should be removed from the list in the future. Houston, Texas and the state of Oklahoma were previously Markets of Concern but were removed in September when market conditions improved.

DSR Resources

We're approaching the one-year mark for some loans with COVID-19 Debt Service Reserves (DSR). To help lenders handle release requests, we've created the following resources:

• COVID-19 DSR Release Overview - SBL pdf
• COVID-19 DSR Release FAQs pdf

If you have any questions or concerns, please reach out to your Freddie Mac representative.

DECEMBER 2020 UPDATES

COVID-19 FAQs

To increase efficiency, Freddie Mac Small Balance Loan (SBL) is sharing a revised approach to prescreen COVID-19 DSR reductions and waivers. Effective for loans under application on or after December 1, lenders can proceed without requiring a prescreen or an exception form when a Small Balance loan/property meets all the following conditions:

Please keep in mind:

• For loans that do not meet the above parameters, there is no change to the criteria; they default to a 12-month P&I DSR.
• Freddie Mac Underwriting & Credit reserves the right to rescind the reduction or waiver based on credit evaluation (including declining/inconsistent collections) of the loan at the time of underwriting.

Exceptions to the above parameters may continue to be requested via the current exception process and discussions with the regional SBL teams. This guidance does not apply to tax, insurance and replacement reserve escrow waiver requests.

JULY 2020 UPDATES

COVID-19 FAQs

We’ve updated the Small Balance Loan (SBL) COVID-19 FAQs pdf to cover a range of frequently asked questions from pre-closing, post-closing, lender inspections, clearing incomplete loan items, and disbursement and release of debt service reserves (DSR). You can find the updated FAQs under COVID-19 Resources on the Originate & Underwrite webpage.

Third-Party Inspections

To further clarify prior communications, a third-party vendor or contractor may conduct an on-site property inspection on behalf of the SBL Optigo® lender. In these situations, the loan must be prescreened with Freddie Mac so we can monitor how many loans we have with third-party inspectors. Lenders must add documentation to the Mortgage Transaction Narrative Analysis (MTNA) and Document Management System (DMS) with detailed notes on the results of the inspection, including additional photos and/or videos of the inspection. This is a temporary authorization due to COVID-19.

JUNE 2020 UPDATES

Full Underwriting Packages

On May 1, we extended the targeted turn-time for full underwriting packages from 9 business days to 12 business days, following check-in of the full underwriting package and the package passing the submission checklist, due to COVID-19 related circumstances. Now that the volume of transactions has returned to normal and credit revisions related to COVID-19 have stabilized, we’re returning to a turn-time of 9 business days.

MAY 2020 UPDATES

DSR Rider

We’ve updated the SBL COVID-19 DSR rider. The revision permits borrowers to request release of the DSR to the extent the borrower can satisfy the outstanding due diligence and collections requirements even if federal/state/local states of emergencies remain in effect. If all other conditions are satisfied, the borrower can request the DSR be released 12 months after the first payment date. The revised DSR rider will be implemented based on the status of loans as follows:

• Prior to final commitment loans: As of May 28, the automated commitment in the Origination and Underwriting System (OUS) will be updated to incorporate the change. Please confirm that the final commitments include the updated provisions.
• Committed and rate-locked loans: The updated DSR rider may be used for any loans not yet delivered to Freddie Mac and must be documented in a commitment amendment.
• Previously funded loans: With respect to previously funded loans, we intend to incorporate the changes in Freddie Mac’s treatment of DSR releases through updates to our securitization documents that will require the servicer to interpret the release conditions as set forth in the revised DSR rider. Nothing further will be required on your part.

Additionally, we have extended the conversion date for any funds remaining in the COVID-19 DSR to 15 months, allowing time for i) borrowers to submit their documentation, and ii) review and approval of the submitted documentation. If you have any questions, please contact your Freddie Mac representative.

Small Balance Loans in Forbearance

Given the COVID-19 pandemic, you may be working with a Small Balance Loan (SBL) borrower who has deals currently in forbearance with Freddie Mac, or another lender. As a reminder, both borrowers and sponsors must disclose current and prior forbearance arrangements when completing Form 1115-SBL and the loan is also subject to prescreen per Exception #19.If a borrower or sponsor requests forbearance on a loan after Form 1115-SBL has been completed, this is a material change in circumstances and a new Form 1115-SBL should be completed and submitted. Please note, having a deal in forbearance does not preclude SBL from financing another property for the sponsor. See the Borrower & Borrower Principal Forbearance document pdffor more information.

Temporary Cycle Time Extension for Full Underwriting Packages

Due to the high number of packages submitted and additional due diligence being provided as a result of COVID-19, we’ve extended the turn-time for a full underwriting package from 9 business days to 12 business days. The Small Balance Loan underwriting and production teams within each region will work to prioritize acquisition financing requests and maturity deadlines. Please communicate any mandatory deadline at package submission. We will let you know when the cycle times go back to the previous turn-time.

Virtual Inspection Notification to Freddie Mac

Virtual inspections should be scheduled through the regional analyst in the same manner as physical property inspections were scheduled. The regional analyst will designate a Freddie Mac representative to participate in the virtual inspection. The Optigo®lender should provideat least 2 business days'notice to coordinate the virtual inspection.

Borrower Certification of Property Condition

The Borrower Certification of Property Condition formdoc doc can now be found on the Originate & Underwrite webpage. If any deferred due diligence is identified, the borrower must complete the Borrower Certification of Property Condition form and the Optigo lender should submit the form with the full underwriting submission.

APRIL 2020 UPDATES

Loans with Declining Rents

We are committed to maintaining liquidity in this evolving market. So, as conditions change, we continue to review and update our approach to due diligence and loan sizing to keep capital flowing while ensuring the safety and soundness of our lending decisions.

Given the rapid decrease in rental income some properties are exhibiting, we are updating our guidelines for all loans being quoted or under application as of today. These guidelines specify case-by-case reviews of current property performance to determine the impact of any decrease in rental income. This is applicable to all products, including Conventional, Seniors Housing, Targeted Affordable Housing and Small Balance Loans, and it applies to those loans currently under application.

Please see the attached summary of our underwriting guidelines pdf and contact your Freddie Mac representative for more information.

Forbearance Documents

In response to further developments with COVID-19 and the requirements of the CARES Act, we have updated our forbearance documents. You can find the latest version on our Asset Management webpage under the Asset Management References tab.

We specifically addressed questions regarding the Small Business Administration (SBA) loans in the COVID-19 Forbearance Program FAQs pdf. The questions include:

Q: Would the borrower obtaining a loan pursuant to the Paycheck Protection Program (PPP) disqualify the borrower from forbearance?

A: No. Neither a PPP loan nor a $10,000 grant/advance under the Economic Injury Disaster Loan (EIDL) program automatically disqualifies the borrower from forbearance, but the Borrower must still comply with the underlying loan document requirements

Q: Are our borrowers permitted to obtain SBA grants or loans?

A: Yes, depending on whether it is an SBL, TAH, or Conventional borrower, and with some limitations.

• Under the SBL program, an unsecured loan such as the PPP, or the $10,000 up-front SBA grant would generally be permitted under our loan docs. The borrower would need to consult its loan documents to determine eligibility.
• We anticipate limited participation of SPE borrowers in the PPP since availability of funding under the PPP is based upon historical payroll expenses of the borrower and payroll expenses for multifamily properties tend to be a smaller portion of a borrower’s expenses.
• For existing loans, a PPP loan or any other SBA emergency relief loan that is secured by the Mortgaged Property (such as an EIDL) requires the prior written consent of the lender to avoid a default under the loan documents.
• Non-SPE entities in the ownership structure, or manager affiliates of the borrower may freely pursue both SBA grants and loans (secured or unsecured) without prior lender consent so long as any collateral provided for the SBA loan doesn’t include any asset covered by the Freddie Mac loan or a security interest in the ownership interests of the Freddie Mac borrower.

 

Please refer to the FAQs document pdffor additional details. Although the FAQs document attempts to provide reliable, useful information, any information or analysis shared in this document is provided for informational purposes only. Optigo® lenders and borrowers must make their own determination as to the appropriate information and resources to use in order to satisfy their obligations under the applicable loan documents, laws and regulations. If you have any questions, please contact your Freddie Mac representative.

Debt Service Reserve Required for All Loans

As part of our commitment to safely maintain liquidity and stability throughout all economic cycles, we are continually evaluating market conditions and adjusting our business to address evolving conditions. In light of this, we are now requiring a Debt Service Reserve (DSR) for all loans that have yet to be committed.

As will be more particularly described in the loan documents, the reserve will be released once the COVID-19 crisis emergency declarations are lifted, full due diligence is confirmed and the property is performing. For SBL Loans, 12-months DSR is required for all loans. We have extended the lender repurchase period to at least 18 months.

If you have any questions, please contact your Freddie Mac representative.

COVID-19 Program Update and Clarification

Due to the circumstances surrounding COVID-19, Freddie Mac Small Balance Loan (SBL) has made temporary changes to our credit requirements. We’ve summarized our temporary credit changes in the SBL COVID-19 Credit & Program Update pdf that is posted on the Originate & Underwrite (O&U) webpage. The changes are effective for all deals taken under app on or after April 2, 2020, unless we have previously communicated otherwise or as specified in the document. Should you have any questions, please reach out to your Freddie Mac relationship manager.

Programmatic Exceptions and Credit Risks

We’ve updated our Program Exceptions and Credit Risks pdf document, along with the Prescreen and Exception Request form xls to reflect recent changes. You can find these documents on the O&U webpage under References & Tools and Requests & Approvals.

Program Updates FAQs

We’ve received numerous questions regarding recent program changes. In an effort to consolidate and address the frequently asked questions, we’ve posted a document titled SBL COVID-19 FAQs pdf on the O&U webpage under References & Tools. Check it out!

MARCH 2020 UPDATES

Temporary SBL Debt Service Reserve

The circumstances surrounding the COVID-19 pandemic have caused unprecedented disruption in fulfilling certain underwriting and purchase requirements, such as site inspections and third-party reports. To continue to provide liquidity for borrowers, the Freddie Mac Small Balance Loan (SBL) team will temporarily require a 12-month Debt Service Reserve (DSR) for all new and uncommitted SBL loans during this time, effective March 30. All commitments will require inclusion of the COVID-19 Debt Service Reserve Rider, which will be posted shortly on our website with our other loan documents. Until it is posted, the rider will be attached to issued commitments.

With this DSR in place, Freddie Mac SBL may allow loans to proceed amid the potential economic impacts of COVID-19 and be purchased with certain modified due diligence reports, such as appraisal, zoning, inspection, physical risk report and seismic.

Accessing Funds to Pay the Mortgage: The borrower will need to submit a request with supporting documents showing less than breakeven collections to be able to apply funds from the DSR to the payment of principal and interest.

Releasing Funds Back to Borrower: The release of the remaining DSR will be within 30 days following satisfaction of the following five items:

• Lender receives a release request from the borrower.
• All federal, state and local emergency declarations or similar government actions related to COVID-19 have been lifted for at least 90 days.
• All due diligence items have been completed to Freddie Mac’s specifications and borrower has remediated all deferred due diligence shortfalls.
• If borrower and Freddie Mac entered into a forbearance agreement, all of the forborne debt service payments have been repaid.
• Borrower provides evidence satisfactory to Freddie Mac of residential occupancy at a minimum of 80% and collections, on a three-month average and for the last month, that satisfy the policy minimum underwritten Debt Coverage Ratio (DCR) for the loan. For example, 1.20x for Top Markets, 1.25x for Standard, etc., with appropriate adjustments for cash-out, full-term interest-only, etc.

Here are a few additional details to note:

• If the borrower does not satisfy the five items above within 12 months after the Effective Date of the Loan Agreement, the remainder of the DSR will be used first to pay down any remaining forborne debt service and then transferred to the Capital Replacement and Repair Reserve for the balance of the loan term and may be used to reimburse the borrower for the cost of Capital Replacements.
• Borrowers may choose to participate in forbearance per the terms of the CARES Act and Freddie Mac’s guidelines. If the borrower chooses forbearance, the forborne payments will be spread over the following 12 months’ debt service payments. If borrower’s repayment of forborne amounts begins while the DSR is still in effect, for any month where collections are below breakeven, borrower may also apply the DSR to that month’s 1/12 repayment of the forborne amount.
• For properties located in areas where Freddie Mac requires a seismic report, SBL will require the borrower to carry earthquake insurance on the property until a satisfactory seismic report is complete.
• The lender must provide evidence that the recordation office has received the request to record in order for Freddie Mac to purchase the SBL loan.

Please visit our Origination and Underwriting page that includes the new documents for the DSR.

Temporary Authorizations

Amid market volatility, Freddie Mac remains steady and open for business. But due to current market conditions, we're makingtwotemporary underwriting changes to our SBL program as follows:

• Effective as of the date of this communication, any loan taken under application that involves a borrower taking cash equity out of the transaction will require a 0.10x increase to DCR and a 5% reduction in LTV. Cash equity out of the transaction will be defined as any cash proceeds greater than 3% of the existing mortgage loan plus junior capital and prepayment penalties.
• Effective as of the date of this communication, for any loan taken under application or not yet committed to by Freddie Mac: Commercial space will be underwritten as if completely vacant, even if occupied. In extremely limited circumstances, and subject to approval by Catherine Evans, vice president of SBL Underwriting, underwriting income from a supply chain critical and/or credit tenant will be considered on a case-by-case basis.

Freddie Mac Multifamily is making credit parameter adjustments across all business lines. These temporary measures will remain in effect until further notice. We continue to look at other ways to address cash-out transactions.

Freddie Mac has developed an approach to deal with impacted borrowers, their properties, their tenants and associated loans. You've likely already received an email in regard to our forbearance approach. If not, please reach out to your Freddie Mac representative for the details.

We've posted a document titled COVID-19 SBL Inspection Guidance pdf on Freddie Mac's Originate and Underwrite webpage under References & Tools regarding guidance and ideas on how to conduct an inspection in the current environment. Please note, we are not requiring anyone to enter occupied units at this time, however, inspections are a risk mitigant. We urge everyone to keep CDC safety guidelines in mind.

Legal Update

The American Land Title Association (ALTA) is tracking the operating status of recording jurisdictions around the country based on reports from ALTA members, colleagues, and State/Regional Land Title Associations. You may access ALTA’s Recording Jurisdiction Operating Status Report here: https://www.alta.org/business-tools/coronavirus.cfm.

Business Update

Freddie Mac is fully engaged in addressing changing market conditions and is working to ensure you are kept updated. If you have any questions about the update below, please reach out to your Freddie Mac Multifamily representative.

With market turbulence intensified by public health news and the oil fight, Treasurys continue to reach new lows, and we are committed to serving our mission.  As you’ve likely read, recordation and closing agencies are starting to report closures. We are working with our Optigo® lenders, legal teams, title companies and closing offices to determine potential resolutions.

• We previously implemented a suspension of Index Locks on specialty products, but due to current industry issues, all Index Locks and early-rate locks have been temporarily paused for all products as we evaluate the market and our offering. Please see the update below for full details.
• Treasury floors are now the greater of 0.75% or 15 bps below current Treasury for all products, except supplementals.
• We’re also adding a Treasury floor of 0.75% on all supplementals, regardless of loan term.
• First quotes issued are valid for five business days instead of 10, and subsequent quotes will remain unchanged at five business days.
• We are no longer waiving good faith deposits for Select Sponsors.
• Beginning with commitments that are issued tomorrow, we are eliminating the cap in the Breakage Fee formula for fixed-rate loans; breakage will now be calculated without the 2% cap. As always, Freddie Mac will pursue the borrower for any breakage fee that is above the good faith deposit.

In response to public health concerns, we’re seeing many organizations move to flexible work arrangements, and Freddie Mac is doing the same and leveraging technology to maintain business functions seamlessly.

JUNE 2021 UPDATES

We’ve updated the COVID-19 Debt Service Reserve (DSR) Release FAQs pdf by adding questions #24 and #25.

Please reach out to your Freddie Mac representative if you have any questions.

MAY 2021 UPDATES

We’ve shared the most recent COVID-19 Debt Service Reserve (DSR) & Credit Changes - Conventional, TAH pdf and have updated the COVID-19 Debt Service Reserve (DSR) Release FAQs pdf with additional frequently asked questions.

MARCH 2021 UPDATES

We're approaching the one-year mark for some loans with COVID-19 Debt Service Reserves (DSR). To help lenders handle release requests, we've created the following resources:

• COVID-19 DSR Release Overview - Conventional and Specialty pdf
• COVID-19 DSR Release FAQs pdf

If you have any questions or concerns, please reach out to your Freddie Mac representative.

JUNE 2020 UPDATES

Credit Update

The impact of COVID-19 and the economic uncertainty it brought added new challenges. But the credit mitigation efforts we put in place earlier this year have served us well, and the market trends are providing valuable information as we move forward.

With three months of data on multifamily operations, we are rolling back our temporary +0.05x DSCR adder for cash-out refinances for Conventional and Targeted Affordable Housing loans. Seniors Housing and Small Balance Loans will continue with the DSCR adder for the time being.

We will reassess the temporary -5% LTV adjustment in the future once we begin to see more complete data running through the appraisal reports. For deals on the edge of the credit box, we will base decisions on the stability of the most recent three months’ collections, as well as other criteria.

MAY 2020 UPDATES

Debt Service Reserve

This week we issued new loan agreement provisions stating that the DSR can be released after 12 months, even if federal, state, or local restrictions are still in place, so long as outstanding due diligence requirements and asset-level performance tests are satisfied. We are hopeful this change provides a clear path forward for our borrowers and lessens ambiguity surrounding DSR releases for our Optigo® network.

• For loans currently in process – new loan agreement provisions to be included in commitments as of Tuesday, May 26.
• For loans that have rate locked or committed but not yet closed – Optigo lender counsel have now received a form amendment letter drafted and circulated by Freddie Mac Legal earlier this week. The form amendment provisions can be included with other amendments required in the ordinary course, and also include corrections to Schedule 1 breakage provisions in the 5-18-2020 form of commitment.
• For loans that have closed – rather than amending individual loans, we intend to incorporate the changes in Freddie Mac’s treatment of DSR releases through updates to our securitization documents that will require the servicer to interpret the release conditions as set forth in the revised DSR riders. Freddie Mac will apply the same servicing standard for portfolio loans.

APRIL 2020 UPDATES

Loans with Declining Rents

We are committed to maintaining liquidity in this evolving market. So, as conditions change, we continue to review and update our approach to due diligence and loan sizing to keep capital flowing while ensuring the safety and soundness of our lending decisions.

Given the rapid decrease in rental income some properties are exhibiting, we are updating our guidelines for all loans being quoted or under application as of today. These guidelines specify case-by-case reviews of current property performance to determine the impact of any decrease in rental income. This is applicable to all products, including Conventional, Seniors Housing, Targeted Affordable Housing and Small Balance Loans, and it applies to those loans currently under application.

Please see the attached summary of our underwriting guidelines pdf and contact your Freddie Mac representative for more information.

Forbearance Documents

In response to further developments with COVID-19 and the requirements of the CARES Act, we have updated our forbearance documents. You can find the latest version on our Asset Management webpage under the Asset Management References tab.

We specifically addressed questions regarding the Small Business Administration (SBA) loans in the COVID-19 Forbearance Program FAQs pdf. The questions include:

Q: Would the borrower obtaining a loan pursuant to the Paycheck Protection Program (PPP) disqualify the borrower from forbearance?

A: No. Neither a PPP loan nor a $10,000 grant/advance under the Economic Injury Disaster Loan (EIDL) program automatically disqualifies the borrower from forbearance, but the Borrower must still comply with the underlying loan document requirements.

Q: Are our borrowers permitted to obtain SBA grants or loans?

A: Yes, depending on whether it is an SBL, TAH, or Conventional borrower, and with some limitations.

• Under the TAH program, SPE restrictions will likely prohibit a borrower from obtaining even an unsecured PPP loan without prior lender consent. Borrowers should consult their lenders regarding specific facts and circumstances.
• We anticipate limited participation of SPE borrowers in the PPP since availability of funding under the PPP is based upon historical payroll expenses of the borrower and payroll expenses for multifamily properties tend to be a smaller portion of a borrower’s expenses.
• For existing loans, a PPP loan or any other SBA emergency relief loan that is secured by the Mortgaged Property (such as an EIDL) requires the prior written consent of the lender to avoid a default under the loan documents.
• Non-SPE entities in the ownership structure, or manager affiliates of the borrower may freely pursue both SBA grants and loans (secured or unsecured) without prior lender consent so long as any collateral provided for the SBA loan doesn’t include any asset covered by the Freddie Mac loan or a security interest in the ownership interests of the Freddie Mac borrower.

Please refer to the FAQs document pdf for additional details. Although the FAQs document attempts to provide reliable, useful information, any information or analysis shared in this document is provided for informational purposes only. Optigo® lenders and borrowers must make their own determination as to the appropriate information and resources to use in order to satisfy their obligations under the applicable loan documents, laws and regulations.

If you have any questions, please contact your Freddie Mac representative.

Debt Service Reserve Required for All Loans

As part of our commitment to safely maintain liquidity and stability throughout all economic cycles, we are continually evaluating market conditions and adjusting our business to address evolving conditions. In light of this, we are now requiring a Debt Service Reserve (DSR) for all loans that have yet to be committed. As will be more particularly described in the loan documents, the reserve will be released once the COVID-19 crisis emergency declarations are lifted, full due diligence is confirmed and the property is performing. For Conventional loans, a six- to nine-month DSR is 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 DSR amount will be six 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 nine months of amortizing debt service.

For Targeted Affordable Housing, Cash preservation follows DSR guidelines set for Conventional; other products will be structured as appropriate for that individual deal.

Debt Service Reserve Update

A Debt Service Reserve (DSR) will be required on all Targeted Affordable Housing (TAH) deals (nine months if below 1.40x DCR / six months if 1.40x DCR or greater).

Assuming full due diligence (per the Freddie Mac Multifamily Seller/Servicer Guide) is complete, the following transaction types may not require a DSR:

• Project-based HAP contract on 100% of the units with a contract term greater than or equal to our loan term
• Eight years remaining on the initial 15-year Low-Income Housing Tax Credit compliance period
• Unfunded forwards during the unfunded period

NOTE: Freddie Mac retains the right to make additional adjustments to credit (including adjusting transaction structure, loan amounts, or requiring a DSR) on all TAH products (including Forward Conversions) based on individual deal terms/circumstances/incomplete due diligence.

We announced on April 1, 2020 that we’ll accept deals with modified due diligence — related to third-party reports and property inspections — with at least a six-month DSR. We’ll release the reserve once the COVID-19 crisis is over, full due diligence is confirmed and the property is shown to be performing.

Please note that the Debt Service Agreement will be forthcoming.

Here’s how the DSR works for TAH cash preservation loans:

• For a loan sized to 1.40x amortizing DCR or greater, irrespective of the actual interest-only period of the loan, the DSR amount will be sized to six 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 nine months of amortizing debt service.

Other products will be structured as appropriate for individual deals.

For commercial tenants on a property, whose clients are not solely property residents, we will not give credit for commercial income and will underwrite much less of the space’s value. We may make some exceptions for already long-established essential businesses, like a pharmacy, or certain high credit-rated businesses.

Cash-out refinances: DCR and LTV credit parameters will be tightened by +0.05x and -5%, respectively, when a property’s rents are near or at market rents of comparable properties. This happens most often in preservation transactions.

If there is a considerable gap (typically 20%) between a property’s rents and those of comparable market-rate neighborhood properties, we will continue with our normal DCR and LTV credit parameters. This includes properties receiving subsidies and HAP contracts where rent collected is near or at market.

Forbearance changes: Since we issued our press release on forbearance last week, Congress has now passed the CARES Act. Here's how pdf we’re adjusting our program to fully comply with those regulations.

MARCH 2020 UPDATES

Forbearance Update

We are offering forbearance up to 90 days and created guidelines for servicers and legal counsel. We plan to announce extension terms for cash preservation and portfolio loans under application that can’t close in time due to the current situation. Immediate Tax-exempt Loans (TELs), immediate 9% LIHTC and forward conversions can use existing extension features that are standard for these products.

Standard breakage language has been added to TEL products, and we have eliminated the cap on breakage for 9% LIHTC and Non-LIHTC forwards. As always, Freddie Mac will pursue the borrower for any breakage fee that is above the good faith deposit.

Legal Update

The American Land Title Association (ALTA) is tracking the operating status of recording jurisdictions around the country based on reports from ALTA members, colleagues, and State/Regional Land Title Associations. You may access ALTA’s Recording Jurisdiction Operating Status Report here: https://www.alta.org/business-tools/coronavirus.cfm.

Open for Business

Amid intense market volatility, we remain steady and open for business — ready to quote your deals, close and securitize.

Here’s where you can help us respond as efficiently as possible: check the thoroughness and quality of your packages carefully so we can provide accurate, timely pricing. Remember that joint underwriting is an especially good option right now; check with your relationship manager for details.

A complete package must include: all construction review materials for rehabs, copies of appraiser engagement letters signed shortly after taking an application, all required legal analyses, all LURAs, as well as complete and final organization charts.

Recent Announcements

• We are taking a pause on all Index Locks and early-rate locks.
• We previously implemented a suspension of Index Locks for specialty products, but due to current industry issues, both Index Locks and early-rate locks are temporarily paused for all products as we evaluate the market and our offering.
• Eliminating the cap in the breakage fee formula for fixed-rate loans, starting with commitments issued today; breakage will now be calculated without the 2% cap. As always, Freddie Mac will pursue the borrower for any breakage fee that is above the good faith deposit.
• No longer waiving good faith deposits for Select Sponsors.

Reminders

• Treasury floors are now the greater of 0.75% or 15 bps below current Treasury for all products, except supplementals.
• We’re also adding a Treasury floor of 0.75% on all supplementals, regardless of loan term.
• First quotes issued are valid for five business days instead of 10, and subsequent quotes will remain unchanged at five business days.

Inspections

We’re developing solutions for situations where the complete due diligence requirements for a Freddie Mac loan can’t be completed. Our teams will make decisions on a case-by-case basis on individual property inspection waivers and risk mitigation.

Customer Visits

We’re now conducting all meetings virtually. Please contact your relationship manager if in-person meetings are business-critical. We have a vital mission and a critical role in the markets — all the more significant in times like these. We will continue to partner with all of you to strengthen your business. Thank you for your flexibility and support. And stay tuned.

Business Update

Freddie Mac is fully engaged in addressing changing market conditions and is working to ensure you are kept updated. If you have any questions about the update below, please reach out to your Freddie Mac Multifamily representative.

With market turbulence intensified by public health news and the oil fight, Treasurys continue to reach new lows, and we are committed to serving our mission.  As you’ve likely read, recordation and closing agencies are starting to report closures. We are working with our Optigo® lenders, legal teams, title companies and closing offices to determine potential resolutions.

• We previously implemented a suspension of Index Locks on specialty products, but due to current industry issues, all Index Locks and early-rate locks have been temporarily paused for all products as we evaluate the market and our offering. Please see the update below for full details.
• Treasury floors are now the greater of 0.75% or 15 bps below current Treasury for all products, except supplementals.
• We’re also adding a Treasury floor of 0.75% on all supplementals, regardless of loan term.
• First quotes issued are valid for five business days instead of 10, and subsequent quotes will remain unchanged at five business days.
• We are no longer waiving good faith deposits for Select Sponsors.
• Beginning with commitments that are issued tomorrow, we are eliminating the cap in the Breakage Fee formula for fixed-rate loans; breakage will now be calculated without the 2% cap. As always, Freddie Mac will pursue the borrower for any breakage fee that is above the good faith deposit.

In response to public health concerns, we’re seeing many organizations move to flexible work arrangements, and Freddie Mac is doing the same and leveraging technology to maintain business functions seamlessly.

Index Lock

Freddie Mac is taking a pause on Index Lock Agreements. Effective immediately, Freddie Mac hereby with this communication rescinds and revokes each and every Index Lock Agreement (ILA) that has been issued by Freddie Mac to an Optigo® lender that has not yet been signed and uploaded to the Document Management System (DMS) by the Optigo lender, in accordance with Section 1 of the ILA.

For those transactions other than student housing, seniors housing, lease-up, and supplemental loans, we currently intend to reissue a new ILA as soon as reasonably practicable, if the Optigo lender requests it.

Every ILA that has been accepted and received by Freddie Mac via DMS as of the time of this email will remain in full force and effect and will be processed in accordance with our then-current business practices when we resume our Index Lock activity.
Additionally, effective immediately, Freddie Mac will no longer interest rate lock any Early Rate Lock Application (ERLA) that has not yet been signed and uploaded into DMS by the Optigo lender. We currently intend to reissue revised ERLAs as soon as reasonably practicable when we resume our early-rate locks.

Thank you for your understanding of these changes. We appreciate your continued partnership — and your business — as we navigate this extraordinary situation together.

SEPTEMBER 2021 UPDATES

With the ongoing impact of COVID-19, we've extended our forbearance program with no end date.

Find the latest COVID-19 servicing resources on the Asset Management webpage.

If you have any questions or concerns, please reach out to your Freddie Mac representative.

JUNE 2021 UPDATES

DSR Release FAQs
We’ve updated the COVID-19 Debt Service Reserve (DSR) Release FAQs pdf by adding questions #24 and #25.

Please remember to use the COVID-19 DSR Release Request Form doc when processing DSR release requests. Using this form will make the DSR release review process more efficient for primary servicers and master servicers.

Forbearance Program Extension
With the ongoing impact of COVID-19, we've extended our forbearance program through the end of June 2021.

If you have any questions or concerns, please reach out to your Freddie Mac representative.

MARCH 2021 UPDATES

DSR Releases
We're approaching the one-year mark for some loans with COVID-19 Debt Service Reserves (DSR). To help lenders handle release requests, we've created the following resources:

• COVID-19 DSR Release Overview - Conventional and Specialty pdf
• COVID-19 DSR Release Overview - SBL pdf
• COVID-19 DSR Release FAQs pdf

Find other COVID-19 resources on the Asset Management webpage.

Forbearance Extension
With the ongoing impact of COVID-19, we've extended our forbearance program through the end of June 2021.

If you have any questions or concerns, please reach out to your Freddie Mac representative.

DECEMBER 2020 UPDATE

Post-funding Property Inspections: To avoid major back-ups with inspection information delivery, please continue conducting inspections wherever possible.

Here’s some guidance to keep in mind during your inspections:

• Document all deviations from standard/required protocol in the Property Inspector’s General Comments in the General Info tab of the inspection.
• As long as your organization’s travel restrictions remain in place, you may use third-party inspectors for properties securing loans whose Risk Rating is greater than six, so long as you are fully reviewing protocol with the inspector ahead of time.
• Inspections of occupied units are not required if the property management/tenant doesn’t allow it for health reasons or the inspector doesn’t feel safe entering occupied units.
• Inspectors should inspect vacant units, down units, commercial space (where possible) and common areas.

Previously we were advising that if a property management doesn’t allow any access due to health concerns, the inspection may be postponed. We’re now concerned that continuing to postpone inspections will result in too many months between information updates. If a property manager makes information available but doesn’t allow any interior access, please perform an exterior inspection and include as much information as possible in the inspection submission. If an additional one-quarter inspection due date extension is necessary, please request one in the Property Reporting System (PRS). Again, document all deviations from standard protocol in the comments.

The next inspection due date will be the same quarter in which the current one is submitted, regardless of the original due date. For example, if the original due date was 9/30/2020 and then it was extended to 12/31/2020 and the inspection was submitted during 4Q 2020, the next inspection will be due 12/31/2021 if annual inspections are required.

If you have any questions or concerns, please contact Gina Thompson.

APRIL 2020 UPDATE

With the COVID-19 situation rapidly evolving, we're sending a compilation of the latest servicing updates to ensure all our partners are hearing directly from us. We’re focused on ensuring the safety and well-being of our customers and staff. As shelter-in-place orders and similar government mandates are enforced, we've updated the Freddie Mac Multifamily Servicing Standard and certain policies. Our goal is to reduce disruptions and to maintain the course of business, to the extent possible. Please reach out to your Freddie Mac Multifamily representative should you have any questions about the information below.

We have released a relief plan for borrowers, their properties, their tenants and associated loans impacted by COVID-19. Since then, Congress passed the CARES Act and we are adjusting pdf to make sure we’re in full compliance with those regulations.

Access the latest forbearance agreements, procedure guide and FAQs on our Asset Management webpage under the Asset Management References tab.

We've created guidance for reporting on loans in forbearance. The guidance includes submitting:

• Investor Reporting Packages to the master servicer
• Pre-securitized forbearance loans to Freddie Mac in MSIR

We’ve also posted a remitting example of how P&I payments and Impounds and Reserves would be reported and remitted during the 12-month forbearance period.
The reporting guidance and remitting example can be found on the Investor Reporting webpage under the References tab.

On March 13, we developed a contingency plan for the delivery of physical final delivery documents to ensure the safety and well-being of all parties, and to prevent documents from being delayed or lost in transit. Effective April 1, we activated the delivery stoppage.
Servicers should now retain all original documents related to approved servicing transactions or loan document corrections, and instead complete and submit the Servicing Bailee Acknowledgment in the Document Management System (DMS). Freddie Mac will retain its required original signatures for approved servicing transactions and will deliver PDF copies of such signatures to servicers to include in the electronic version of the document uploaded to DMS.

If there are other obstacles to closing an approved servicing transaction related to original signatures or recordation, please contact the Freddie Mac attorney named in the approval letter.

We’ve extended the benchmarking metrics reporting deadline for Freddie Mac Multifamily Green Advantage® loans from March 31 to May 31. For assistance completing the benchmarking reports, please refer to the guides on this page in the Resources box.

MARCH 2020 UPDATE

In light of current public health concerns, we have created a contingency plan for final delivery packages should there be obstacles to delivering loan documents. Our goal is to minimize potential impacts to our ability to fund the loans you have closed.

 

View the Contingency Plan

The safety of our customers and staff is our utmost concern. We will continue to assess the situation and provide further updates.

APRIL 21, 2020

During COVID-19, we’ve been looking for ways to balance health and safety with prudent lending practices. A few weeks ago, we released guidance for property inspections pdf. To supplement this document, we’ve created guidance for conducting live virtual property inspections for new loan originations. This alternative method will help protect the health and safety of inspectors, property owners and tenants while also maintaining our best-in-class credit quality.

VIEW THE VIRTUAL INSPECTIONS GUIDANCE pdf

Please also share this guidance with appraisers, engineers, etc., who you engage for property inspections. As a reminder, please adhere to CDC safety guidelines during property inspections.

If you have any questions, please contact your Freddie Mac representative.

APRIL 6, 2020

We previously released a contingency plan for temporary changes to our Final Delivery Package Requirements (the Contingency Plan) in the event of (i) widespread disruption in the overnight package delivery system, or (ii) corporate decisions by Freddie Mac, warehouse lenders, Optigo® lenders and/or closing counsel that would limit our or their ability to either deliver or receive original loan documents.

After receiving requests from numerous Optigo lenders and closing counsel, we decided to implement the Contingency Plan, effective April 1, 2020. The Contingency Plan will remain in effect until we deliver the Discontinuance of Contingency Plan Notification. Although the full text of the Contingency Plan is set forth in your letters of commitment, as amended, please note the following effective as of April 1:

• If you are serving as a bailee for Freddie Mac (each, a Bailee), and/or if another party is serving as a Bailee, you will direct each Bailee to: (i) continue to hold any original loan documents in such Bailee’s possession, including any slip pages, (ii) cease delivery of any original loan documents until your receipt of the Discontinuance of Contingency Plan Notification, and (iii) complete and execute the form of Bailee Acknowledgment for each mortgage loan and for any subsequent deliveries.
• You or your counsel shall (i) submit the executed Bailee Acknowledgment(s) in the Document Management System (DMS) for each mortgage loan contemporaneous with the delivery of the electronic delivery portion of the Final Delivery Package, and (ii) provide email notification to Freddie Mac at [email protected] when such Bailee Acknowledgment(s) and the electronic delivery portion of the Final Delivery Package have been submitted to Freddie Mac via DMS.
• Any additional Bailee Acknowledgments required in connection with slip pages should be submitted in DMS for such mortgage loan contemporaneous with the electronically delivered slip pages.
• We also modified the Warehouse Lender Release of Security Interest (Form 996M) to account for the scenario in which your warehouse lender (or your closing counsel on behalf of such warehouse lender) maintains possession of an original note and must continue to possess such note as a Bailee until we deliver the Discontinuance of Contingency Plan Notification. Revised Form 996M has been delivered to each warehouse lender.

While we do not like disrupting our standard delivery processes, we think this is in the best interests of all to better protect staff needed to gather and send or receive the documentation, to prevent documents from being delayed or lost in transit, and to ensure we are in the best position to continue to purchase closed loans in a timely manner in the face of constantly evolving disruptions.

Resources:

• Bailee Acknowledgment Form for Optigo Lenders and Closing Counsel doc
• Omnibus Amendment; First Amendment to Omnibus Amendment pdf
• Updated Commitment Language (Contingency Plan) pdf

APRIL 1, 2020

We are committed to providing stability and liquidity to the multifamily finance market. In light of COVID-19, we have been adapting to keep business moving in a safe and sound manner while maintaining the safety of our staff, customers, borrowers and their renters.

Forbearance

Last week we issued a press release regarding our approach to dealing with affected properties and associated loans. Since then, Congress passed the CARES Act and we are adjusting to make sure we’re in full compliance with those regulations.

• We are encouraging borrowers to only enter into a forbearance agreement if it is needed to continue their business operations.
• To align with the CARES Act, the latest date to enter into a Forbearance Agreement will be the earlier of the termination of the National Emergency declared by the President of the United States and December 31, 2020.
• Borrowers will repay forborne amounts over a period of 12 months, but they have the option to pay it back sooner. No late fees or interest charges will be applied during the forbearance period.
• We have developed a standard forbearance form/agreement that is non-negotiable. Borrowers also must submit a hardship letter explaining their circumstances and attach a tenant delinquency and forbearance report demonstrating the effect of the national COVID-19 emergency on the property’s operation and performance.
• Borrowers must agree to a moratorium on evictions during the forbearance period. This includes a prohibition on initiating the eviction process or pursuing current evictions already in process.
• Borrower must remain in compliance with all other terms and conditions of the Loan Documents and at all times comply with all laws (including the CARES Act), ordinances, rules, regulations and requirements of any governmental authority having jurisdiction over the property.

Debt Service Reserve

Freddie Mac is fully committed to maintaining liquidity in the market despite the challenges of COVID-19. We realize that performing full due diligence in the current environment is challenging so we are offering an option that provides certainty of execution, despite those obstacles. We are now accepting deals with modified due diligence but will require a minimum six-month Debt Service Reserve (DSR). The reserve will be released once the COVID-19 crisis is over, full due diligence is confirmed and the property is shown to be performing.

• For a loan sized to a minimum 1.40x amortizing DCR or greater, irrespective of the actual interest-only period of the loan, the DSR amount will be sized to six 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 nine months of amortizing debt service.

There will also be a DSR requirement for all loans that are not yet committed for the offerings below:

• Student – A 12- to 18-month DSR is required to cover through the start of the 2021/2022 school year.
• Seniors – A minimum 12-month DSR is required.
• TAH – Cash preservation follows Conventional guidelines above; other products will be structured as appropriate for that individual deal.
• SBL– 12-months DSR is required for all loans. We have extended the lender repurchase period to at least 18 months.
• Supplementals– A 12-month DSR for the entire debt stack will be required.

Production

• Until our view of the market is clearer, we are narrowing our focus on unstabilized offerings such as Lease-Up, Value-add and Moderate Rehab.
• We are narrowing our focus for student housing property refinances until fall of 2020. This will give us time to see what impacts COVID-19 ultimately has on the student housing sector. We will consider student housing acquisitions on a very limited basis but have seen that pipeline organically diminish with the uncertainty in this space.
• We are narrowing our focus on refinances for seniors housing properties until we see how this market recovers from the pandemic.
• Supplementals will not be considered for properties that have elected for forbearance.

Underwriting

Credit changes will be different by product, market and individual properties but our goal is to continue to deliver liquidity in a safe and sound manner.

• We are taking a more conservative approach for cash-out loans at this time.
• We have adjusted market tiers for cities with a high reliance on oil or tourism — specifically, Houston, Las Vegas, New Orleans and Orlando. These cities have been moved to Tier 6, resulting in a starting point of -5% LTV and +.05x DCR.
• Commercial Income – We are taking a more critical and limited view of commercial income in consideration of long-term viability.

Rate-Locks

• Index Locks and early-rate locks (ERL) are suspended for all products. We have permanently removed Index Locks for supplementals, seniors, student loans and specialty products.
• Standard Rate-lock Agreements will be modified and, once they resume, ERLAs and Index Lock Agreements will be modified to remove 2% breakage cap on all locks (i.e., ERL, standard, index).

Treasury Floors

• Treasury floors are now the greater of 0.75% or 0.15% below current Treasury at the time of quote for all products, except supplementals.
• We’ve also added a Treasury floor of 0.75% on all supplementals, regardless of loan term.

Quotes

• First quotes issued are valid for five business days instead of 10, and subsequent quotes will remain unchanged at five business days.
• We are no longer waiving good faith deposits for Select Sponsors.

Capital Markets Update

Despite high levels of volatility across all markets in the last few weeks, we are feeling encouraged by some recent improvements and rebounds. We continue to issue new securitizations across all major products (K-fixed, K-floating, and SBL) and continue to maintain an active calendar throughout April.

Thank you for your continued partnership with us during this challenging time.

MARCH 2021 UPDATE

We're approaching the one-year mark for some loans with COVID-19 Debt Service Reserves (DSR). To help lenders handle release requests, we've created the following resources:

• COVID-19 DSR Release Overview - Conventional and Specialty pdf
• COVID-19 DSR Release Overview - SBL pdf
• COVID-19 DSR Release FAQs pdf

APRIL 2020 UPDATE

Credit changes will be different by product, market and individual properties but our goal is to continue to deliver liquidity in a safe and sound manner.

• We are taking a more conservative approach for cash-out loans at this time.
• We have adjusted market tiers for cities with a high reliance on oil or tourism — specifically, Houston, Las Vegas, New Orleans and Orlando. These cities have been moved to Tier 6, resulting in a starting point of -5% LTV and +.05x DCR.
• Commercial Income – We are taking a more critical and limited view of commercial income in consideration of long-term viability.

MARCH 2020 UPDATE

We consider the health and safety of our employees, Optigo® lenders, property owners, managers and residents to be of the utmost importance.

As the current situation changes moment by moment regarding travel and “social distancing,” we are balancing health and safety with prudent lending practices.

Property inspections are critical to the commercial real estate and lending markets, and the current situation is making this more difficult. Given increasing hesitation for all parties to travel — and from owners, managers and residents to allow in-unit inspections of their properties — we are working with our teams to develop solutions to situations where the complete due diligence requirements for a Freddie Mac loan cannot be completed as usual. Unfortunately these solutions will vary by product, property type, location and level of due diligence waivers that are being sought — along with mitigants to the increased risk associated with a particular property inspection waiver.

Due to the number of different types of requests we are receiving, we can’t provide a one-size-fits-all solution.

That said, we are empowering our regional leadership teams with the ability to make decisions on a case-by-case basis as to how each individual property inspection waiver can be viewed from a risk mitigation perspective. The answer may vary, and Conventional, Targeted Affordable, Seniors Housing and Small Balance Loans will all have a different solution as each has a different risk profile and underwriting process.

Please work with your regional and/or product leadership teams to ensure that your individual situation is addressed.

Thank you for your flexibility as we tackle this issue together.

JUNE 2021 UPDATES

Freddie Mac has extended to September 30, 2021 the deadline for requesting a new or supplemental COVID-19 forbearance agreement for its Multifamily loans. Read more here.

DECEMBER 2020 UPDATES

Freddie Mac has extended to March 31, 2021, the deadline for requesting a new or supplemental COVID-19 forbearance agreement for its Multifamily loans. Read more here.

JUNE 2020 UPDATES

Freddie Mac announced it has created three supplemental forbearance relief options that also extend several tenant protections.

MAY 2020 UPDATES

Freddie Mac’s forbearance relief plan in response to COVID-19 allows qualifying multifamily loans to defer up to three months of mortgage payments

Today we released our second forbearance report that provides an overview of this program as of the May 26 security payment date. We plan to release these reports monthly and you’ll find them here.

APRIL 2020 UPDATES

New Forbearance Research Report

Freddie Mac recently enacted a forbearance relief plan in response to the COVID-19 pandemic that allows qualifying multifamily loans to defer up to three months of mortgage payments.

Today we released a report that provides an overview of this program as of April 13. As detailed in the report, master servicers reported 327 forborne securitized loans, or roughly 1.4% of our total securitized loan population. This equates to about $1.7 billion of outstanding unpaid principal balance (UPB) and represents 0.6% of our total securitized UPB.

The data in our report is sourced from four different master servicers – three external and Freddie Mac. The external master servicers reported the forbearance requests that have been approved. Freddie Mac, as Master Servicer for 85% of the forborne loans, also reported loans that have requested forbearance, whether or not the request has been approved.

We found that roughly one-quarter of all securitized deals have at least one loan forborne. There is a higher percentage of forborne loans in SB-Deals®, which can partially be attributed to how Freddie Mac – the sole Master Servicer of SB-Deals – reported forborne loans not yet approved. It is worth noting that the credit quality of these loans was good leading up to the COVID-19 crisis – over 86% of the loans requesting forbearance have DSCRs above 1.25x and roughly 98% of forbearance loans have a LTV of less than 80%. The report provides additional information around product types, geographical concentration and maturity year.

For additional details about our COVID-19 continuity plans, check out our COVID-19 webpage. Reporting guidance and remitting examples can be found on the Investor Reporting webpage under the “References” tab.

CARES Act

We are committed to providing stability and liquidity to the multifamily finance market. In light of COVID-19, we have been adapting to keep business moving in a safe and sound manner while maintaining the safety of our staff, customers, borrowers and their renters.

On March 24, 2020 we issued a press release regarding our approach to dealing with affected properties and associated loans. Since then, Congress passed the CARES Act and we are adjusting to make sure we’re in full compliance with those regulations.

• We are encouraging borrowers to only enter into a forbearance agreement if it is needed to continue their business operations.
• To align with the CARES Act, the latest date to enter into a Forbearance Agreement will be the earlier of the termination of the National Emergency declared by the President of the United States and December 31, 2020.
• Borrowers will repay forborne amounts over a period of 12 months, but they have the option to pay it back sooner. No late fees or interest charges will be applied during the forbearance period.
• We have developed a standard forbearance form/agreement that is non-negotiable. Borrowers also must submit a hardship letter explaining their circumstances and attach a tenant delinquency and forbearance report demonstrating the effect of the national COVID-19 emergency on the property’s operation and performance.
• Borrowers must agree to a moratorium on evictions during the forbearance period. This includes a prohibition on initiating the eviction process or pursuing current evictions already in process.
• Borrower must remain in compliance with all other terms and conditions of the Loan Documents and at all times comply with all laws (including the CARES Act), ordinances, rules, regulations and requirements of any governmental authority having jurisdiction over the property.

Forbearance Documents

In response to further developments with COVID-19 and the requirements of the CARES Act, we have updated our forbearance documents. You can find the latest version on our Asset Management webpage under the Asset Management References tab.

We specifically addressed questions regarding the Small Business Administration (SBA) loans in the COVID-19 Forbearance Program FAQs pdf pdf. The questions include:

Q: Would the borrower obtaining a loan pursuant to the Paycheck Protection Program (PPP) disqualify the borrower from forbearance?

A: No. Neither a PPP loan nor a $10,000 grant/advance under the Economic Injury Disaster Loan (EIDL) program automatically disqualifies the borrower from forbearance, but the Borrower must still comply with the underlying loan document requirements.

Q: Are our borrowers permitted to obtain SBA grants or loans?

A: Yes, depending on whether it is an SBL, TAH, or Conventional borrower, and with some limitations.

• Under the SBL program, an unsecured loan such as the PPP, or the $10,000 up-front SBA grant would generally be permitted under our loan docs. The borrower would need to consult its loan documents to determine eligibility.
• Under the Conventional or TAH program, SPE restrictions will likely prohibit a borrower from obtaining even an unsecured PPP loan without prior lender consent. Borrowers should consult their lenders regarding specific facts and circumstances.
• We anticipate limited participation of SPE borrowers in the PPP since availability of funding under the PPP is based upon historical payroll expenses of the borrower and payroll expenses for multifamily properties tend to be a smaller portion of a borrower’s expenses.
• For existing loans, a PPP loan or any other SBA emergency relief loan that is secured by the Mortgaged Property (such as an EIDL) requires the prior written consent of the lender to avoid a default under the loan documents.
• Non-SPE entities in the ownership structure, or manager affiliates of the borrower may freely pursue both SBA grants and loans (secured or unsecured) without prior lender consent so long as any collateral provided for the SBA loan doesn’t include any asset covered by the Freddie Mac loan or a security interest in the ownership interests of the Freddie Mac borrower.

Please refer to the FAQs pdf for additional details. Although the FAQs document attempts to provide reliable, useful information, any information or analysis shared in this document is provided for informational purposes only. Optigo® lenders and borrowers must make their own determination as to the appropriate information and resources to use in order to satisfy their obligations under the applicable loan documents, laws and regulations.

If you have any questions, please contact your Freddie Mac representative.