New York's need for affordable housing has never been higher and arguably the city's never offered less incentive for developers.

Concerns over cap limits have led to emphasis on properties that house low-income tenants.

With the city's workforce and middle-income residents in need of suitable homes, Freddie Mac and Fannie Mae's small balance loan programs can offer a needed boost to investors looking to acquire or refinance properties that hold five to 50 units.

"Commercial real estate investors seeking loans up to $5M for acquisition or refinance continue to find the terms and interest rates offered by government-sponsored enterprises (GSEs) to be attractive," Hunt Mortgage Group senior managing director Rick Warren tells Bisnow.

"The Freddie Mac Small Balance Loan program is designed to provide stability and liquidity to the affordable rental housing market, offering a streamlined processes and loan documents," Rick says.

He points to the GSEs' competitive pricing, fixed-rate structures and interest-only options as benefits for borrowers.

Rick tells us Fannie Mae also offers attractive fixed terms and allows borrowers to pay over seven, 10, 12, 15 or 30 years. Existing clients are potentially also eligible for supplemental financing and would then be able to tap into equity without refinancing their original loan.

Eligible properties include cooperatives in New York City and Long Island, conventional multifamily housing with five or more units, and conventional housing with tax abatements and Section 8 vouchers.

The supplemental loans are non-recourse and follow the same 30-year payment schedule as the original commercial real estate mortgage.

These loans offer needed light at the end of a dark tunnel while 421-a's limbo continues to add urgency to this market's development, but not just anyone will qualify.

For example, mixed-use properties are eligible for the Small Loan Program, but lenders differ in their expectations—particularly with respect to the amount of commercial income allowed for mixed-use.

Lenders with offices throughout the US have the advantage of a strong regional underwriting system as well as extensive portfolio data from which to draw.

But "regardless of property location, lenders want to see a demonstration of strong operations and market knowledge," Rick says. "While an attractive property is desirable, the qualifications of sponsors factor heavily into making a good deal."

For more information about our Bisnow partner, and to find out how Hunt can help you acquire a GSE loan, click here.