Small multifamily properties – with five to 50 units – compose a sizable portion of the multifamily rental market and much of this housing stock is affordable to low- and very low-income households. Yet lending programs in this segment are inconsistent across lenders and regions and the secondary mortgage market has participated little compared to conventional market activities. 

In line with Freddie Mac Multifamily’s mission, we launched a small balance loan (SBL) program in September 2014 focused on loan amounts ranging from $1 million to $5 million; targeting properties with five to 50 units.

Our in-depth research and analysis into the SBL market’s size, underwriting, risk factors, and historical loan performance highlight ways in which the market is similar to our conventional business and how it differs. Several factors need to be taken into account to fully understand this market segment: underwriting and due diligence differences, higher percent of expected losses in the event of a credit default, and the borrower often has more flexibility to prepay at little to no cost. 

Read the report.