Fannie Mae and Freddie Mac Change COVID Reserve Policies

May 27, 2021

Editor's Note: On November 1, 2021, Freddie Mac eliminated its Debt Coverage Reserve for Small Balance Loans. Read more in this update.

In the past week, both Freddie Mac and Fannie Mae have relaxed their COVID-19 debt service reserve requirements for borrowers across a range of multifamily products. With the post-pandemic recovery showing continued signs of promise, the GSEs have formally announced changes that will impact existing and new loan applications, effective immediately.

Fannie Mae removed its reserve escrows requirements for most loan products offered by Delegated Underwriting & Servicing (DUS®) lenders, and Freddie Mac significantly reduced its requirements across conventional loans.

Fannie Mae

For DUS lenders such as Greystone, Fannie Mae no longer requires COVID-19 reserve escrows for DUS Conventional or Small Loans at any leverage point. Seniors housing and Student housing loans still require “pre-review,” and reserves for those deals will be evaluated on a case-by-case basis.

Freddie Mac

Freddie Mac has eliminated its debt service reserve on new and existing (but not yet rate locked) Conventional and Targeted Affordable Housing (TAH) loans. For Seniors housing, Student housing, and pre-stabilized assets, the debt service reserve requirements remain, but are reduced to six months.

Freddie Mac Conventional & TAH have also eliminated the 5% reduction in Loan-to-Value for cash-out refinances, and any commercial income restrictions due to COVID-19.

The Freddie Mac Small Balance Loan (SBL) program, loans between $1 million to $7.5 million, has reduced the debt service reserve to 6 months for full leverage acquisitions and reduced or waived the debt service reserve for lower leverage acquisition and refinance transactions.

Freddie SBL is expected to make further adjustments to COVID reserves, commercial income requirements and cash out refinance adders in the near future.

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