🏦 The biggest differentiator between bank and agency apartment financing is whether the loan is recourse or non-recourse. Fannie Mae and Freddie Mac (agency) loans used to buy or refinance apartment buildings are non-recourse, meaning that the debt is secured only by the loan collateral (e.g. the apartment community). If you default on a non-recourse loan, the lender can only recoup the pledged collateral. They can’t go after your personal assets. One of the biggest benefits of working with non-recourse lenders is that your personal liability is protected.
✱ The other major factor is if the property or the sponsors don't meet the requirements for agency debt such as net-worth, experience and occupancy standards. This is when you want to look at bank options. Additionally, if your plan is to refinance or sell quickly credit unions are sometimes the best because often times they don't have prepayment penalties.
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