Freddie Mac Eliminates COVID Reserves for Small Loans

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On November 1, Freddie Mac noted that due to positive signs of recovery in the multifamily market, its Small Balance Loan (SBL) portfolio has demonstrated strong metrics in terms of occupancy and rent collections. With that in mind, Freddie Mac has eliminated Debt Service Reserves (DSR) for all SBL loans in process that have not yet closed.

"The main purpose of the COVID-19 Debt Service Reserve (DSR) was to ensure there were funds available to make debt service payments in case a property experienced stress due to the pandemic," wrote Steve Lansbury, Senior Vice President, Freddie Mac, in a company update on the topic.

Parameters for this change include:

  • For all loans with a Commitment issued and not yet closed, an amendment to the Commitment is necessary
  • For all loans closed and not yet funded, we will follow the process for DSR releases. The mortgaged properties must have achieved average Rental Collections (based on trailing three-month average and the immediately preceding month’s collections) equal to or greater than the Release Rental Collections (as such terms are defined in the loan documents)
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