The 80% LTV Loan is Dead

Tim Milazzo
March 30, 2020

Fannie Mae and Freddie Mac have altered their underwriting guidelines for stabilized multifamily loans. In the process, they’ve killed the 80% LTV loan.

OK, not officially. Here is the newest maximum leverage breakdown for Freddie Mac:

Yes, 80% LTV is still on there for “Top Markets” and “Standard Markets”. But the truth is, you were never really getting to 80% leverage in those markets anyway, because the cap rates are low enough that the loans get constrained by DSCR long before they reach max LTV.

It was the small markets, with higher cap rates, where 80% LTV was viable. But Freddie Mac is scared of providing that last-dollar debt in these markets now in light of the nascent economic downturn, even though the Federal Reserve has stepped up to buy the bonds they churn out.

Fannie Mae hasn’t dropped their max LTV yet (officially), but what they have done is drastically increase the cash reserve requirements for high leverage loans in lower tier markets, as well as increasing their minimum DSCR.

Bank and credit union lenders were already lower leverage than these agencies. So you won’t get 80% leverage there either.

So, mathematically, an 80% LTV mortgage can still happen. But good luck finding that kind of deal and getting it through underwriting.

RIP, 80% multifamily perm financing.

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