What it is
"Agency" refers to the government-sponsored enterprises Fannie Mae and Freddie Mac. Both buy or guarantee multifamily loans that meet their program guidelines. Borrowers don't apply to the agencies directly. They work with approved lenders: Fannie Mae's Delegated Underwriting and Servicing (DUS) lenders and Freddie Mac's Optigo lenders.
Some people also group HUD/FHA multifamily programs under "agency," but HUD is a federal agency, not a GSE, and its programs work differently.
What properties qualify
Agency programs are built for multifamily housing. Depending on the program, that includes:
- Conventional apartment properties
- Affordable and workforce housing
- Seniors housing
- Student housing
- Manufactured housing communities
- Small balance multifamily loans through dedicated programs
Office, retail, industrial and hospitality properties are not eligible for agency multifamily programs.
Common features
Each agency has many programs with different terms, so these are general patterns rather than rules:
- Long terms, often five to ten years and sometimes longer, mostly fixed rate, with floating options.
- Amortization commonly up to 30 years, with partial or full interest-only available on some deals.
- Non-recourse with standard carve-outs. See recourse.
- Leverage and coverage set by program, and usually tighter for properties with weaker metrics. Sizing uses DSCR and LTV.
- Prepayment commonly yield maintenance or a step-down, depending on the program. See prepayment penalty.
- Assumable, subject to approval.
What lenders need
Agency lenders underwrite stabilized properties on in-place performance. They look for stable occupancy over several months, a clean T-12 and rent roll, and a sponsor with multifamily experience and adequate net worth and liquidity. Third-party reports (appraisal, environmental, property condition) are ordered by the lender.
Agency versus other permanent options
| Agency | Bank | CMBS | |
|---|---|---|---|
| Property types | Multifamily only | Most | Most |
| Recourse | Typically non-recourse | Often recourse | Non-recourse |
| Flexibility after closing | Moderate | Higher | Lower |
Common mistakes
- Sending an unstabilized property. Agency programs generally want stabilized occupancy over a period, not a single strong month.
- Assuming one set of terms. Each program has its own leverage, coverage and prepayment rules.
- Underestimating timing. Third-party reports and approvals take time.
In the package
Lead with occupancy history, the T-12, rent roll and sponsor multifamily track record. Agency loans commonly take out bridge loans on value-add multifamily once the property stabilizes.