Sierra Capital offers a Capped Adjustable Rate Program which allows Borrowers to take advantage of lower short-term rates with prepayment flexibility.
Adjustable-Rate Mortgages (ARMS) are ideal for Borrowers who expect rates to go down or those who prefer the additional property cash-flow resulting from the lower adjustable interest rate. An ARM is also attractive to Borrowers who want to reposition their properties through a management change or moderate rehabilitation.
Advantages of our ARM products include:
Choice of indices: 1-month or 3-month Freddie Mac Reference Bill® index or a 1-month or 3-month London Interbank Offered Rate (LIBOR) index
Interest-Only option available
Convertible to a Sierra Capital Fixed-Rate loan
Streamlined underwriting with only minor changes to loan documents at Fixed-Rate conversion
Capped Adjustable Rate Program Guidelines
Indices:
Multifamily ARMs can be indexed to either Freddie Mac Reference Bill® or LIBOR
Eligible Loans:
Refinance, acquisition or moderate rehabilitation financing of Garden,
mid-rise and high-rise apartments
Loan Amounts:
$5 million+
Term
Loan-to-Value
Minimum Term for Borrower-Provided Cap
Maximum ARM Proceeds Compared to Fixed-Rate Proceeds
Sizing Requirements: Amortizing Minimum DCR1
Interest-Only (IO) Options
IO Available? (Y/N)
Maximum IO Period
Sizing Requirements: IO Min. DCR
5-Year
> 70% to 75%
5-year
<= Fixed-rate
1.05x
N
N/A
N/A
> 65% to < 70%
3-yr w/ escrow2
103%
1.05x
Y
Full-term
1.30x
< 65%
No cap
105%
1.05x
Y
Full-term
1.30x
7-Year
> 75% to 80%
7-year
<= Fixed-rate
1.05x
Partial
2-year
N/A
> 70% to < 75%
4-yr w/ escrow2
103%
1.05x
Partial
2-year
N/A
> 65% to < 70%
4-yr w/ escrow2
105%
1.05x
Y
Full-term
1.30x
< 65%
No cap
105%
1.05x
Y
Full-term
1.30x
10-Year
> 75% to 80%
10-year
<= Fixed-rate
>70% to < 75%
5-yr w/ escrow2
103%
> 65% to < 70%
5-yr w/ escrow2
105%
< 65%
No cap
105%
Prepayment Options:
Option One
1-year lock-out period
1% prepayment premium if paid off after the lock-out period
No prepayment premium for last 90 days of loan term
No exit or conversion fees if converted to a new Sierra Capital /Freddie
Mac Fixed-Rate loan
Option Two
Year
Prepayment Premium
1
3%
2
2%
3 and Beyond
1%
No prepayment premium for last 90 days of
loan term
Starting in year 4, Sierra Capital will waive
the remaining 1% prepayment premium if the loan is converted to a Sierra
Capital/ Freddie Mac Fixed Rate Loan
Option Three
Year
Prepayment Premium
1
3%
2
2%
3 and Beyond
1%
No prepayment premium for last 90 days of
loan term
Starting in year 6, Sierra Capital will waive the remaining 1% prepayment
premium if the loan is converted to a Sierra Capital/Freddie Mac Fixed
Rate Loan
Recourse Requirements:
Nonrecourse except for standard carve-out provisions
Minimum Occupancy:
90% for 90 days prior to closing
Third Party Reports:
Required for appraisal, environmental report and engineering report
Replacement Reserves:
Generally Required
Tax and Insurance Escrows:
Generally Required
Assumability:
Related-party transfers may be allowed
Origination Fee:
Transaction specific
Early Spread-Lock Option:
Loan amount and gross mortgage spread to the index may be locked for 120
days prior to closing of loan
Interest-Rate Cap:
Maximum interest rate for the loan is generally established by calculating
the rate that provides a DCR of 1.15x.
Conversion to New Fixed-Rate Loan:
To be eligible for conversion, the ARM must have no existing monetary
or non-monetary defaults and no past monetary defaults
The standard streamlined conventional cash mortgage requirements in
effect at the time of conversion will apply to the new fixed-rate loan
Cash out to the Borrower is permitted at conversion as long as the
LTV and DCR requirements are met
No exit or conversion fee will be charged
Only minor changes needed for the Fixed-Rate loan documents
