Agency Loans
FinancingAgency loans are multifamily and commercial real estate loans that are originated by approved lenders and then guaranteed or purchased by government-sponsored enterprises (GSEs) — primarily Fannie Mae (Delegated Underwriting and Servicing, or DUS), Freddie Mac (Optigo), and HUD/FHA (221(d)(4) for construction/substantial rehab, and 223(f) for acquisition/refinance). Because the GSEs backstop the debt, these loans offer the lowest rates and longest terms in commercial real estate.
How it works. A borrower applies through an approved agency lender. The loan is underwritten to GSE standards: minimum DSCR (typically 1.25x), maximum LTV (typically 75–80%), and property condition requirements. The lender prices the loan based on the property’s cashflow, the spread over the corresponding Treasury, and the borrower’s net worth and experience. Approved loans are sold to the GSE, which securitizes them. The result for the borrower: fixed rates for 5–30 years, amortizations up to 30–35 years, and often non-recourse (no personal guarantee beyond “bad boy” carve-outs).
Agency loans are the gold standard for stabilized multifamily. They are not for distressed assets, short-term holds, or borrowers without a track record. Fannie and Freddie both require a minimum net worth and liquidity of the guarantor (key principal), and post-2008 underwriting is thorough.
Example. You acquire a 15-unit apartment building for $1,800,000 that produces $140,000 in net operating income. A Fannie Mae DUS lender offers a 10-year fixed-rate loan at 75% LTV ($1,350,000) with a 30-year amortization. The debt service is $96,000/year, yielding a DSCR of 1.46x — comfortably above the 1.25x minimum. The rate is locked at application, and the loan is non-recourse.
Agency debt sits at the bottom of the capital stack (first to be repaid, lowest cost). For how non-agency alternatives compare, see DSCR loans explained.