Freddie Mac's Small Balance Loan program is gone. Here's what replaced it
Freddie Mac no longer makes Small Balance Loans. Guide Bulletin M2026-3, dated June 23, 2026, says Freddie stopped accepting SBL applications on April 30, 2026. Small apartment loans now go through Optigo Conventional Small, which Freddie announced on April 15, 2026 as part of its core conventional platform.
If a lender or an old article quotes you “SBL” terms, ask which product they actually mean.
The new product in one table
From Freddie Mac’s Optigo Conventional Small term sheet (footer dated 4/26):
| Term | Conventional Small |
|---|---|
| Loan size | Generally $2 million to $10 million |
| Property | Predominantly market-rate, 5 to 50 units; acquisition or refinance |
| Max LTV | 75% for terms under 7 years, 80% for 7 years and up; 65% to 70% if interest-only for the full term |
| Min coverage | 1.25x, on an amortizing basis |
| Amortization | Up to 30 years |
| Terms | 5, 7, 10, 12 or 15 years |
| Rate | Fixed only |
| Prepayment | Yield maintenance until securitized, then a 2-year lockout, then defeasance; open the last 90 days. Step-down and yield maintenance without defeasance cost extra |
| Recourse | Non-recourse except standard carve-outs |
| Fees and locks | 0.1% application fee; 60-day spread lock after application |
The LTV and coverage grid is the same one printed on Freddie’s larger Optigo fixed and floating-rate sheets. In practice, small loans now underwrite to the same 1.25x as big ones.
What doesn’t qualify
The term sheet excludes student housing, seniors housing, manufactured housing communities and cooperatives from Conventional Small. It also lists as ineligible: fractured or vertical condos, Delaware statutory trusts, properties with HAP contracts, master leases and ground leases, scattered sites, co-living, properties on septic or well, and buildings where micro-units are more than 5% of the units. No hard subordinate debt is allowed. The borrower has to be a single-purpose entity, and a tenancy-in-common can have no more than five tenants in common.
The HAP exclusion matters if you own a building with project-based Section 8. Those deals go to Freddie’s Targeted Affordable products, Fannie Mae or HUD instead.
The term you pick sets the LTV ceiling
Pick a 5-year term and the ceiling is 75%. Pick 7 or more and it’s 80%. On a $6 million building, that’s the difference between $4.5 million and $4.8 million, if coverage allows it. Often it won’t: at 6.75% over 30 years, $300,000 of NOI supports about $3.08 million at 1.25x, well under either LTV figure.
Longer terms also mean longer exposure to yield maintenance and defeasance. If you might sell in year four, a 7-year term buys five points of LTV that you pay for later. The comparison app picks the shortest Freddie term that covers your hold period and flags the prepayment cost when your hold is shorter than the term.
Compared with Fannie Mae’s small loans
Fannie Mae’s Small Mortgage Loans go up to $9 million nationwide at 80% LTV and 1.25x, amortizing over up to 30 years, with yield maintenance or a declining prepayment premium. Fannie’s version also takes affordable properties, market-rate co-ops and manufactured housing communities, which Conventional Small does not. (Fannie Mae’s term sheet was read from an Internet Archive copy dated December 17, 2025, because Fannie’s site blocks automated readers.)
Between $9 million and $10 million, Conventional Small can go where Fannie’s small-loan program can’t. Above 50 units, it’s the reverse.
Sources
- Freddie Mac Guide Bulletin M2026-3, June 23, 2026
- Optigo Conventional Small term sheet, footer 4/26
- Freddie Mac Multifamily news, April 15, 2026 announcement
- Fannie Mae Small Mortgage Loans term sheet, archived copy dated December 17, 2025