Fannie Mae

This type of capital is typically used to place long-term financing on stabilized multifamily properties that a property owner intends to hold for the long-term. After a Fannie Mae loan is closed, the loan originator contributes it to a pool of other loans that are then bundled together and securitized. Securitization, in layman terms, means that the loan pool is figurately chopped up into loan pieces with varying risk and return profiles. The pieces are converted into bonds and sold to fixed-income investors. Post securitization, the same lender that originated the loan typically services the loan throughout the remaining loan term.

Loans are originated through a DUS (delegated underwriter and servicer). The DUS program relies on shared risk with private lenders providing certainty and speed of execution and competitive pricing. In short, Fannie Mae delegates its lending partners to underwrite, approve and service loans while setting the program underwriting guidelines and agreeing to purchase the mortgage at a future date. Under the DUS, Fannie Mae is neither a lender nor a servicer. Loans range from $750,000 (under Fannie’s small balance program) to hundreds of millions of dollars.