• Skip to primary navigation
  • Skip to content

Freddie Mac Small Balance Loans

Non-Recourse, Fixed and Adjustable-Rate Apartment Financing

  • Home
  • Information
    • Loan Facts
    • Terms, Qualifications, and Guidelines
    • Term Sheet
    • Interest Rates
    • Portfolio Loans
  • Knowledge Base
    • Frequently Asked Questions
    • Glossary
  • Application
    • Application Process
    • Third Party Reports
    • Appraisal Process
    • Environmental Assessments
    • Property Condition Reports

What are the Advantages of Non-Recourse Loans?

June 5, 2019 By Janover Ventures

Non-Recourse Financing Limits Risk for Investors  

Fortunately for borrowers, Freddie Mac Small Balance Loans are generally non-recourse. When a borrower signs a non-recourse loan agreement, they do not have to sign a personal guarantee (PG), putting their personal property up as collateral if they default on their loan. Instead, lenders can only go after the property itself if a borrower defaults.

“Bad Boy” Carve-Outs and Non-Recourse Financing

Nearly all non-recourse loans, including Optigo Small Balance Loans, are subject to “bad boy” carve outs. These are additional agreements that “carve out” sections of the recourse agreement, making the loan full recourse under certain conditions. Typical actions that could trigger “bad boy” carve out provisions include committing criminal acts, intentionally declaring bankruptcy, and avoiding violating any of the covenants of the Special Purpose Entity (SPE) that will actually own and hold the collateral property. While some carve out provisions are only triggered upon a borrower committing seriously fraud or negligence, others can be triggered by minor administrative issues. Therefore, it’s extremely important for borrowers to carefully read and understand all the components of any carve outs included in their loan agreement– before they sign on the dotted line.

Some Freddie Mac Small Balance Loans Have Limited Recourse

While Freddie Mac’s terms for the Optigo SBL loan program can be strict, they aren’t set in stone. For loans that stretch Freddie Mac’s loan terms– such as having a DSCR below the standard requirements, or having an LTV slightly above the regular limits, the lender and/or Freddie Mac may add a limited recourse provision to the loan in order to reduce their risk.

Filed Under: Freddie Mac Multifamily Loans, Freddie Mac SBL, Frequently Asked Questions Tagged With: Bad Boy Carve Outs, Freddie Mac Multifamily, Freddie Mac Optigo, Freddie Mac SBL, Freddie Mac Small Balance Loans, Non-Recourse Apartment Loans, Non-Recourse Loans

Reader Interactions

 

Multifamily.Loans, Inc. is a Janover Ventures company. Please visit some of our family of sites at: Multifamily.loans, Commercial Real Estate Loans, CMBS.loans, SBA7a.loans, Home.loans, HUD.loans, HUD 232, HUD 223f, HUD 223a7, SBA Express Loans, SBA 504 Loans, and OpportunityZones.Help.

 

 

 


Janover Inc.
7601 N Federal Hwy. Ste B140
Boca Raton Florida 33487

Email: hello@multifamily.loans

 

Terms of Use

Information

Loan Facts

Terms, Qualifications, and Guidelines

Term Sheet

Interest Rates

Portfolio Loans

 

Knowledge Base

Frequently Asked Questions

Glossary

Application

Application Process

Third Party Reports

Appraisal Process

Environmental Assessments

Property Condition Reports