Small Balance Loan Breakdown with Hunt Mortgage’s Matthew Frank

The vice president of Hunt Mortgage’s Small Balance Loan Group explains how the Freddie Mac program can meet and adapt to the various needs of the borrower despite the tight lending environment.

Matthew Frank, Vice President of Hunt Mortgage Group’s Small Balance Loan Group
Matthew Frank, Vice President of Hunt Mortgage Group’s Small Balance Loan Group

Financing has become more challenging for owners of smaller multifamily portfolios as some lending institutions have pulled out of the market. Small balance loans can be a viable solution for small and emerging real estate owners. Matthew Frank is vice president of Hunt Mortgage’s Small Balance Loan Group and is overseeing Hunt’s new production office in Phoenix. He walked us through the company’s Freddie Mac program, which was launched in 2014. 

How are small balance loans different compared to other financing solutions for small-property owners? What makes this product competitive?

Frank: Small balance loans through Fannie Mae and Freddie Mac are non-recourse, compared to most bank and credit unions that require recourse from the borrower. Through the Small Balance Loan (SBL) Program we can offer longer fixed terms at more competitive rates than banks and credit unions. Also, we do not cap how much a borrower can borrow. Banks and credit unions typically cap how much someone can borrow.

How can these small balance loan packages be customized according to the borrower’s needs?

Frank: They can be customized in several ways: length of the fixed period, prepayment penalties, amortization length and if the borrower would like an interest-only option for one year to the full length of the loan. We work with each borrower to help them meet their objectives. Furthermore, as lending experts in the small balance space, we can help our clients think through various options available.

How have the needs of small property borrowers changed in the past few years?

Frank: I believe that many lending institutions have pulled out of the multifamily market or increased their loan sizes, leaving the smaller multifamily properties with limited access to debt. In addition, borrowers with portfolios of smaller multifamily properties have to go to several institutions to place debt on their properties. When they find out about the SBL Program they realize they can have a one-stop shop without a cap on the amount they can borrow.

Is your small balance financing available in smaller markets or do you have a limited area where these products are available?

Frank: We do offer loans in small and very small markets through the SBL Program. We operate nationwide.

Hunt offers financing through Freddie Mac’s SBL Program, launched in 2014. How do you see the performance and evolution of the program in the past three years?

Frank: Hunt was one of three lenders selected to pilot this program. It has been a huge success and we were delighted to be part of it since inception.

What are the challenges in the small-loan market? How can these difficulties be overcome?

Frank: Challenges in the small-loan market tend to be competition from other lending institutions and that many of the borrowers do not have sophisticated property management, so the income and expense numbers may not always be detailed. I believe that as borrowers of smaller apartment buildings become more aware of the agency products and familiarize them on how they work, it will increase the need for detailed management of their assets.

What are your plans regarding Hunt Mortgage’s new office in Phoenix?

Frank: Help grow Hunt’s presence in Phoenix and the Arizona market. Phoenix provides a stable market that is still affordable compared to many other metropolitan cities.

Image courtesy of Hunt Mortgage Group