Should You Go Straight to the Agency Lender? Maybe Not.

Tim Milazzo
May 15, 2018

Agency debt for multifamily properties is awesome. It’s non-recourse, offers long-term fixed rates, and features competitive rates. The agencies (Fannie Mae and Freddie Mac) don’t lend direct, but they both license a set of direct lenders to offer their products according to standardized underwriting, and then take the loans and securitize them on the back end. So march right in to your favorite agency lending office and ask for a term sheet. Right?

Well, maybe not.

How Agency licenses work

How “DUS” it work?

Both Fannie Mae and Freddie Mac authorize a set of lenders to offer their lending products, and to service loans in place. “DUS” stands for “designated underwriter-servicer”. While the underwriting and servicing guidelines make quotes from agency lenders who tap into the same programs very similar, there will be differences in actually applying deal and market data to the models, so two or three agency lenders can come back with slightly different quotes.

Geographic Coverage

Another driver of differences between agency lenders is tied to geography, for two reasons:

  1. License coverage — just because an agency lender has license to lend on behalf of Fannie or Freddie in one geography, does not mean they have nationwide coverage for that particular loan program. Both agencies have geographic guidelines for their lenders.
  2. Data available — even if the lender does have national coverage for an agency product that fits your investment, that lender may impose their own geographic focus based on the location of their teams, the data available for different markets, or their own preferred area of focus.

Specialized product focus

Senior housing, small balance loans, affordable housing, manufactured housing, green financing… go ahead and visit the agency websites (Fannie, Freddie), and verify that these are all different categories of loan products. There are nuances for each loan program category and underwriters at various firms that specialize in tailoring financing solutions for each one.


Sometimes you’ll get a quote from an agency lender, and the above nuances won’t be sufficient to explain the differences vs another loan quote. That’s because each DUS firm has built-in wiggle room from the agencies where they can make additional money, either through charging fees, or building a spread into the rate.

Now don’t go yelling at your friend who works as an originator and has been feeding you agency loans for the last decade. While originators may have some say at particular shops, these systems are set up at the firm level. Let’s not cry about it — let’s just work the system and get you the best agency financing available.

How to work the system

Let the agencies compete

Is Fannie or Freddie the best option for you? Or even HUD/FHA?

It’s hard to give a blanket answer. Some people will do so, saying that Freddie Mac is stronger for larger, urban markets, and Fannie Mae is a better bet for smaller/suburban areas. Those statements may actually be true in a majority of circumstances, but there are many nuances to account for. These loan programs and the rates also change over time. You’re best off letting the agencies compete for your loan on each property.

Let the DUS lenders compete

So let the designated lenders themselves compete. Make sure the lenders selected have experience within the same geography and specialty product (if applicable). It doesn’t hurt you to have a couple different Freddie Mac quotes. It only hurts you if you were to then submit a full application with multiple lenders.

Let other multifamily lenders compete!

Once you get through the process of letting a few Fannie lenders and a few Freddie lenders beat each other up, you may find that a bank is actually your best option. Or a credit union. People always forget about the credit unions! After all, Fannie and Freddie both securitize these loans, so they are more restrictive than a local institution who will keep a loan on their balance sheet — make sure the terms justify the documentation and restrictions.

Don’t waste your own time

Find an unaffiliated expert and use their time in placing the right financing on a deal. Use up StackSource’s time on your deal, if you can (it will be difficult because we’ve built our process to streamline the origination experience). We have connections to multiple agency lenders representing Fannie Mae, Freddie Mac, and HUD/FHA, plus an extensive network of banks, credit unions, and other lenders who will each compete for your deal. We also have better success getting your “borderline” agency deal funded, especially if you (the borrower) are not yet a big repeat source of business for these capital sources.

To submit information about your multifamily loan, submit project information through our tech platform, and you’ll be paired with an expert Capital Advisor who will be your single point of contact.

Find the right commercial real estate financing with StackSource by getting instantly matched to the best debt and equity options for your project from our nationwide network of capital sources. 

Our expert Capital Advisors help you secure your ideal capital stack, resulting in a lower cost of capital for your investments in less time and with more transparency than a traditional commercial mortgage brokerage. Learn more at