Agency debt refers to loans or debt instruments that are originated, guaranteed, or purchased by government-sponsored enterprises (GSEs) or federal agencies in the United States. These are most commonly associated with multifamily and affordable housing finance, and they offer long-term, fixed-rate, non-recourse financing options.
Key Providers of Agency Debt:
- Fannie Mae (Federal National Mortgage Association)
- Freddie Mac (Federal Home Loan Mortgage Corporation)
- HUD/FHA (U.S. Department of Housing and Urban Development / Federal Housing Administration)
Characteristics of Agency Debt:
|
Feature |
Description |
|
Purpose |
Primarily used for financing stabilized multifamily properties, affordable housing, senior housing, and healthcare facilities. |
|
Loan Terms |
Long-term (typically 5–30 years), often with fixed interest rates. |
|
Amortization |
Fully amortizing or interest-only for a portion of the term. |
|
Non-Recourse |
Borrower is not personally liable beyond the collateral, except in cases of fraud or misrepresentation. |
|
Underwriting Standards |
Strict criteria including occupancy levels, debt service coverage ratios (DSCR), and property condition. |
|
Prepayment Penalties |
Often include yield maintenance or defeasance. |
|
Attractive Rates |
Lower interest rates due to government backing or guarantees. |
Types of Agency Loans:
- Fannie Mae DUS (Delegated Underwriting and Servicing): Offers flexibility in loan structuring and underwriting.
- Freddie Mac Optigo: Includes conventional, targeted affordable, and small balance loan programs.
- HUD 223(f): Used for refinancing or acquiring multifamily properties with long amortization periods (up to 35 years).
Benefits of Agency Debt:
- Competitive interest rates
- Long-term stability
- Non-recourse structure
- High leverage (up to 80% LTV in some cases)
- Strong secondary market liquidity
