Who handles Freddie Mac Loan Assumption

Question

I am currently purchasing a property that has a Freddie Mac loan assumption available with 4.82% rate, 9 years remaining and 30 years amortization. The income and LTV can cover another 2nd loan as well.

I am wondering do I need to use the original lender who originated the Freddie Mac loan for the loan assumption? Or I can shop for the cheapest fee? The one seller referred me to has a lot of fee, and I feel like it's more than what I would have paid on a new loan.

Secondly, am I allowed to get a 2nd loan along with this loan assumption? I did my calculation, I can still borrow another $250k to meet the 1.25 DSCR and 80% LTV.

Ian Stuart · Answer

Hey Helen - You have to work with the firm that originated the original 1st lien Freddie Mac loan. If that's Berkadia - you have to use Berkadia. If it's CB / Walker / JLL - you gotta use them.

That said - you don't have to use the specific BANKER that originated the loan. You just have to use a banker you like at the COMPANY that originated the loan. IE - if Berkadia originated the loan, you can pick which banker at Berkadia you want to use for the loan assumption / 2nd lien supplemental loan.

Also yes you can put 2nd lien supplemental debt on the property - they size to a combined 80% LTV; 1.25x DCR; 30-year amortization in most cases. FYI - supplemental loan rates are typically ~1.00%-1.20% wide of current 1st lien rates, so if current 1st lien mortgages are trading at 6.00%.... expect your supplemental loan to price in the low 7.00%'s on rate (it's still cheaper than equity).

I work for the #1 Freddie Mac Optigo multifamily lender in the country - Berkadia - so reach out in the future with any Q's, thanks.

Account Closed · Answer

I don't know if you are required to use the lender that originated the loan or not.  I would expect it to be a lot easier to use the original lender (assuming they are the servicer) because they will be the most familiar with the loan and have better access to loan specific docs.

Kevin Romines · Answer

I'm not on the servicing end of the lending spectrum, so I cant say with 100% accuracy that you cant do an assumption with any other lender than the servicer, but that would be my guess in this case. Below is some info. you will want to address as part of the assumption process.

Suggested legal language for Purchase and Sale Contract:

Seller and Buyer each acknowledge that in connection with Buyer’s application for approval to assume the loan(s) currently encumbering the property (the “Loan Assumption”) certain items must be delivered to __________________ [INSERT NAME OF LOAN SERVICER] (“Servicer”) so that Servicer may timely process the request for Loan Assumption. Seller has been advised that only after Servicer receives a complete Loan Assumption request package will Servicer then be obligated to begin processing such request. [On or before ______________, 20__] or [Within ________ [INSERT NUMBER OF DAYS] from the [date of this agreement], Seller and Buyer agree to deliver to Servicer all supporting documentation for Servicer’s Loan Assumption approval review. These items typically include the following: 1. Copy of executed contract of sale 2. Current financial statements and of proposed transferee and its principals, along with credit reports, real estate experience and background for each 3. Current and proposed detailed organizational charts 4. Freddie Mac Form 1115 – Borrower and Borrower Principal Certificate(s) 5. Freddie Mac Form 1116 – Real Estate Schedule for proposed transferee 6. Information regarding proposed professional manager and/or transferee’s management experience 7. Evidence of insurance 8. Current, certified financial statements for property (T-12, if not previously submitted to Servicer) 9. Budget for year 1 for property for proposed new borrower 10. Moisture Management Plan, certified by the Servicer 11. Copies of third party reports related to the ownership transfer, if necessary 12. Applicable fees.

While the above-referenced items identify what is customarily required by Servicer to support a Loan Assumption request, Seller and Buyer acknowledge and agree that the terms, provisions and conditions of the documents governing the loan(s) to be assumed will ultimately control, including, without limitation, transfer fees and costs, release language, legal opinions and the documentation required to evidence the Loan Assumption. Buyer acknowledges that submission of the required items does not ensure Servicer’s approval of the Loan Assumption, and that Servicer’s evaluation of Buyer’s application will be made in accordance with Servicer’s underwriting standards and the terms of the loan documents