WASHINGTON, DC–Fannie Mae has rolled out a new product for its small-loan product line: a hybrid, adjustable rate loan with flexible long term financing and an array of prepayment options.
It is a 30-year mortgage fixed for a period of 5, 7 or 10 years. Once the fixed-rate period ends it automatically converts to an adjustable rate, which is tied to the spread over the six-month Libor. There are caps built into the adjustable rate so the loan doesn't fluctuate too wildly when rates change.
The loan has a prepayment penalty during the fixed rate period but once it converts to the adjustable rate it is open to prepayment.
“Borrowers like it because they dont have a balloon payment at the end of the fixed rate period,” Ann Atkinson, director in customer engagement, tells GlobeSt.com. In addition, the loan can execute quickly under Fannie's delegated model, she said.
The financing will be available for properties with 5 to 50 units and for loans of $5 million or less. Proceeds from the loans can be used for acquisitions or refinancings.
Fannie Mae is adding the product following calls for something like it from borrowers and sponsors, according to Mike Winters, vice president for Multifamily Customer Engagement. “We always try to listen to customers about what their needs are.”
He added that lenders already have applications out for the product.
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