Preservation Rehabilitation Financing can be used for the acquisition/refinancing and moderate rehabilitation of affordable properties with new Low-Income Housing Tax Credits (LIHTCs). In particular, it can be used with: 

• Bond Credit Enhancements with 4% LIHTC

• Tax-Exempt Loans with 4% LIHTC

• 9% LIHTC Cash Loans

Terms:  

• Minimum term: Remaining LIHTC compliance period or 15 years, whichever is less; 15 years with HUD Risk Sharing

• Maximum term: 35 years; rehabilitation/stabilization period (maximum of 24 months) will be included in loan term

Amortization:  Up to 35 years. Loans are interest only during the rehab/stabilization period. 

Maximum LTV/Minimum DSCR: 

• Tax-Exempt Financing with 4% LIHTC:

  • Variable-rate with cap hedge: 80% of adjusted value or 85% of market value/1.20x

  • Fixed-rate: 85% of adjusted value or 90% of market value/1.25x

• 9% LIHTC Cash Loan: 90% of market value/1.15x for new tax credits

Eligible Properties:  

• Tax-Exempt Financing with 4% LIHTC: Garden, mid-rise, or high-rise properties with new 4% Low-Income Housing Tax Credits (LIHTCs) undergoing moderate rehabilitation (must have tenants in place.)

• 9% LIHTC Cash Loan: Garden, mid-rise, or high-rise properties with new 9% LIHTCs undergoing moderate rehabilitation (also must have tenants in place.)

Prepayment Penalty: 

• Tax-Exempt Financing with 4% LIHTC: Fee maintenance

• 9% LIHTC Cash Loan: Yield maintenance

Advantages:

• Eligible mixed-use properties supported

• Offers LTVs of up to 90% of market value for some loans

• Amortizations of up to 35 years

• Subordinate financing is allowed

Disadvantages

• Typically requires letter of credit collateral to fund gap between supported loan amount and size of actual bond mortgage

In this article:
1. Freddie Mac Loans for the Preservation/Renovation of Affordable Properties
2. Sample Freddie Mac Terms for Preservation Rehabilitation Financing in 2024
3. Get Financing