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FREDDIE MAC OPTIGO®
Float-to-Fixed-rate Loan (Two-Plus-Seven)
We call the float-to-fixed-rate loan a “two-plus-seven” because payments during the first two years of the loan are floating-rate and interest-only and the following seven years of the loan are fixed-rate. The Borrower receives superior cash-on-cash returns through the first two years and can lock a coupon for the life of the loan at the initial closing.
Float-to-Fixed-rate Loan (Two-Plus-Seven)
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ELIGIBLE BORROWERS
Must be well-qualified.
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FLOATING-RATE PERIOD
- 2 years.
- IO, no cap required, locked-out/no prepayments.
- No supplemental loans during floating-rate period.
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FIXED-RATE PERIOD
- 7 years.
- IO subject to 7-year fixed-rate IO credit parameters with defeasance.
- Amortizing loan with defeasance.
- Securitization-ready.
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UNDERWRITING
- Compliant with current credit parameters.
- Sized based on fixed-rate.
- Must pass Refinance Test using aggregated term (2 years floating plus 7 years fixed) with 2 years of IO.
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PRICING
- Terms (subject to revisions due to market fluctuations):
- Floating-rate: 30-day Average SOFR + 20 bps.
- Fixed-rate: 7-year UST + 7-year fixed pricing + 20 bps.
- Fixed-rate is locked when the floating-rate spread is locked; index locks also available during underwriting.
- No future rate adjustments.
- Terms (subject to revisions due to market fluctuations):
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PROCESS AND CONVERSION TO FIXED-RATE
- Conversion of floating-rate to fixed-rate is automatic.
- Permits additional loan proceeds via a supplemental mortgage (pari passu); any additional proceeds will be priced at then first-mortgage pricing.
- Freddie Mac must receive request for additional proceeds no less than 150 days prior to conversion.
- For securitization purposes, updated third-party reports required prior to fixed-rate period conversion; third-party reports paid by Freddie Mac unless additional proceeds are requested.
- If original loan fails to meet Freddie Mac’s credit parameters at conversion, Freddie Mac retains the right to restructure the transaction via a split note at time of securitization.
- Supplemental loans are allowed beginning the second year of the fixed-rate period.
In its prequalifying review, Lument will attempt to estimate both the loan amount and the fees and costs associated with the transaction. Actual loan amounts and actual fees and expenses may vary from the prequalifying estimates. A prequalifying estimate is not a commitment to make a loan.