Freddie Mac small balance loans after the 2026 change

What changed in April 2026

Freddie Mac moved small apartment loans out of a separate program and onto its core conventional platform. For borrowers, the trade is simple: the new product is closer to a full-size Freddie Mac loan, with longer fixed terms, but it is less forgiving on size, rate type and prepayment.

Feature	Legacy Small Balance Loan (closed)	Optigo Conventional Small (current)
Loan size	Legacy SBL (retired April 2026): $1 million to $7.5 million, 5 to 50 units3	generally $2 million to $10 million2
Rate type	Fixed and hybrid adjustable	Fixed only
Terms	Fixed and hybrid adjustable terms	5, 7, 10, 12 or 15-year fixed terms2
Prepayment	Step-down by default: Former Freddie Mac SBL Option 1: 5-4-3-2-1 (5-year), 5-5-4-4-3-2-1 (7-year), 5-5-4-4-3-3-2-2-1-1 (10-year)4	Yield maintenance until securitization, 2-year lockout, then defeasance; open final 90 days2
Ineligible	Set by the legacy term sheet	Excludes student, seniors, MHC and co-op properties; no hard subordinate debt2

Freddie Mac made $47 billion across more than 17,000 Small Balance Loans since 2015¹ before the switch, so this was not a niche program. One of the largest SBL lenders reported the expiration in its SEC filing: April 30, 2026⁵.

Who gained and who lost

Gained: owners of stabilized, mostly market-rate buildings in the middle of the range who want a long fixed rate. The longest terms on the new menu run longer than many banks will fix a rate, without a personal guarantee.

Lost:

• Small loans below the new floor. The old program started lower, so the smallest buildings now fall to Fannie Mae, banks and credit unions.
• Borrowers who want an adjustable rate. The legacy hybrids are gone.
• Borrowers who expect to sell early. The default is now yield maintenance, then lockout and defeasance. Step-down and yield maintenance without defeasance are available on Conventional Small for an added cost², so the old flexibility now has a price.
• Seniors, student, manufactured housing and co-op owners, and anyone with hard subordinate debt.

Sizing example: why the term changes the loan (illustration)

An illustration, not a quote: a stabilized 30-unit building worth $4,500,000 with $330,000 of underwritten NOI, at an illustrative 6.45% note rate and a 30-year amortization for the coverage test.

	Five-year term	Ten-year term
Loan-to-value cap	$4,500,000 x 75% = $3,375,000	$4,500,000 x 80% = $3,600,000
Coverage test (constant 7.55%)	$330,000 / 1.25 / 7.55% = $3,499,000	$3,499,000
Loan	$3,375,000 (leverage binds)	$3,499,000 (coverage binds)

Choosing a term of seven years or longer moves this loan up by about $124,000 because the shorter-term leverage cap (75% max LTV (5 to under 7-year terms)²) no longer binds. The cost is a longer prepayment structure, so the right answer depends on how long you will hold.

The coverage test uses an amortizing payment even on interest-only loans: Freddie Mac tests DCR on interest-only loans using an amortizing payment, not the interest-only payment². Interest-only limits: Full-term interest-only: 65% LTV (7 years or less), 70% (over 7 years)².

Costs, locks and timing

• Application fee: 0.1% of the loan amount², plus the lender’s own fees.
• Rate protection: 60-day spread lock after application; Index Lock may be available². That lock covers the spread, so the Treasury piece still moves until you lock it too.
• Interest basis: Actual/360 is standard on Freddie Mac Conventional Small; 30/360 is available². Actual/360 makes the effective annual interest slightly higher than the quoted rate suggests.
• Lenders: 22 Optigo Conventional Small lenders (June 30, 2026)⁶, a small network, so the lender you start with matters.
• Refinance test: No refinance test at 1.40x amortizing DCR or higher and 60% LTV or lower².

Freddie Mac has updated its Conventional Small pricing grid since launch through notices behind its lender login. Ask the lender whether anything has changed since the April 2026 term sheet before you rely on a figure here.

What the lender checks and what kills small deals

The underwriting is the conventional Freddie Mac box applied to a small building: trailing income, a rent roll tied to bank deposits, a market management fee even if you self-manage, real tax and insurance costs, and a single-purpose borrower entity with key principals who sign a carve-out guaranty. Deals fall out most often over:

• Size below the floor after the lender’s NOI adjustments shrink the loan.
• Hard subordinate debt, such as seller financing left in place.
• Mixed income that does not fit “predominantly market-rate”.
• A short hold. If you plan to sell within a few years, the prepayment structure can cost more than the rate saves. Run it in the prepayment calculator.

Where to go instead

Your situation	Look at
Loan below Freddie Mac’s floor	Fannie Mae Small Loans, bank, credit union
Want an adjustable rate or light prepayment	Bank or credit union
Rental income does not yet cover the debt	DSCR loan or bridge loan
Several small properties	Portfolio and blanket loans
Loan above the ceiling	Freddie Mac Optigo or Fannie Mae DUS