The Difference Between Multifamily and Single-Family Businesses
In certain ways, the Freddie Mac Multifamily business is similar to the Single-Family business. Both buy and securitize mortgages originated by a network of approved lenders; we do not lend money directly to borrowers. By selling mortgage loans to us, lenders receive money that they can use to make loans to additional borrowers. That, basically, is where the similarities end.
Multifamily financing is much more like commercial lending. Multifamily borrowers primarily are commercial entities, such as property developers, not individuals (homeowners). We only buy loans from around 30 or so commercial real estate lenders, many of whom do not make single-family loans.
For this reason, Multifamily’s loans are much larger than Single-family’s – typically, between $10 million and $50 million; however, they can range from $1 million to more than $1 billion. Our underwriting is not automated; Freddie Mac Multifamily staff complete the underwriting process and price mortgages before we buy them, including estimating future revenues from the properties.
|Property size||5 or more units||1 to 4 units|
|Freddie Mac lenders||About 30 Optigo® lenders||More than 1,700|
|Loan size||$1 million to $100s millions – no current limit||Legislated limit of $548,250 ($822,375 in high-cost areas) for a 1-unit home|
|Underwriting process||Manual – each loan is unique||Typically automated|
|Number of parties involved||Many, sometimes including government agencies||One borrower|
|Source of mortgage payments||Income from rents||Borrower’s personal income|
|Servicing involvement||Active in monitoring each loan’s performance||Involved in a loan’s performance if it becomes delinquent|
Freddie Mac finances all types of multifamily rental properties.
Garden-style: 1-, 2-, or 3-story apartment development built in a garden-like setting in a suburban, rural, or urban location; buildings may or may not have elevators
Walk-up: 4- to 6-story building without an elevator
Mid-rise: Multi-story building with an elevator, typically in an urban area
High-rise: Building with 9 or more floors and at least 1 elevator
Manufactured housing community: Community in which the operator leases ground sites to owners of manufactured homes
Special-purpose housing: Property of any style intended for a certain population segment
- Seniors housing: Dedicated to housing older adults; includes independent and assisted living, skilled nursing, memory care, and continuing care communities
- Student housing: At least half of the units are intended for students attending a nearby learning institution
- Subsidized housing: Caters to renters with low incomes or special needs and is made affordable by rent and income restrictions