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HUD 223(f) vs Fannie Mae and Freddie Mac: which permanent loan fits
HUD 223(f) lends more (87% of value at 1.15x for market-rate deals) for longer (up to 35 years, fully amortizing) than the agencies' standard fixed-rate products (Freddie Mac's April 2026 term sheet: up to 80% at 1.25x, 30-year amortization, 5- to 10-year terms ending in a balloon). HUD adds a 0.25% annual MIP, a five-year statutory prepayment bar on 223(f) and slower processing. Fannie and Freddie are not HUD.
The short version
All three are long-term, fixed-rate, non-recourse apartment loans backed in some way by the federal government. HUD stretches further on leverage and term; Fannie Mae and Freddie Mac move faster and give more structuring options. Most sponsors decide on three questions: how much proceeds the deal needs, how long they will hold, and how much time they have.
Side by side
| Term | HUD 223(f) | Fannie Mae fixed-rate | Freddie Mac Optigo fixed-rate |
|---|---|---|---|
| What it is | FHA mortgage insurance on a lender’s loan | Loan bought or guaranteed by Fannie Mae | Loan bought by Freddie Mac |
| Max LTV, market rate | 87% (90% affordable) | 80% | 75% for 5 to under 7 years; 80% for 7 years or more (amortizing) |
| Min DSCR | 1.15x (1.11x affordable) | 1.25x | 1.25x (amortizing) |
| Term | Up to 35 years, at least 10 | 5 to 30 years | 5 to 10 years (up to 30 if not securitized) |
| Amortization | Fully amortizing over the term, level payments | Up to 30 years | Up to 30 years |
| Interest-only | Not permitted | See current term sheet | Partial or full-term, at lower leverage |
| Balloon | None | At maturity unless fully amortizing | At maturity |
| Minimum loan | No HUD minimum | See current term sheet | $10 million |
| Recourse | Non-recourse, bad-acts carve-outs | Non-recourse with carve-outs | Non-recourse with standard carve-outs |
| Insurance or guarantee cost | 0.25% upfront and 0.25% a year MIP | In the rate | In the rate |
| Prepayment | No prepayment for 5 years by statute (exceptions), then the note’s schedule | Yield maintenance or prepayment premium | Yield maintenance, 2-year lockout after securitization, then defeasance; open last 90 days |
| Borrower entity | Single-asset entity; no TICs as borrower | See current term sheet | SPE; TIC with up to 10 tenants in common allowed |
| Construction version | Yes, 221(d)(4) | No (standard products) | No (standard products) |
| Assumable | Yes, with HUD TPA approval | Per loan documents | Per loan documents |
HUD figures: Mortgagee Letter 2025-03, the MAP Guide and the 2025 MIP notice. Freddie Mac figures: its Optigo fixed-rate term sheet dated April 2026. Fannie Mae figures: its published fixed-rate term sheet, which blocks automated requests and could not be re-read for our October 31, 2026 check, so treat that column as indicative. Agency terms change without notice and are adjusted by property and market; confirm with a lender before relying on them.
Where HUD wins
- Proceeds. On a coverage-constrained deal, 1.15x against 1.25x lets the same income support about 8% more annual debt service, before differences in rate and HUD’s MIP. On a value-constrained deal, 87% against 80% is seven points of leverage. Run the 223(f) sizer to see which test binds.
- No refinance risk. A HUD loan amortizes to zero over as long as 35 years. Agency loans balloon at the end of their term, so the owner takes interest rate risk at maturity.
- Assumability as an asset. A long, fixed, fully amortizing HUD loan at a good rate can be worth money to the next buyer. See assuming a HUD loan.
- One program for build and hold. A developer can use 221(d)(4) through construction and keep the same loan for 40 years.
Where Fannie and Freddie win
- Speed and certainty of timing. HUD does not publish an end-to-end processing time, and HUD files move through more review stages. See the timeline guide.
- Exit flexibility. No statutory five-year bar, and shorter terms suit a business plan with a sale in view. See HUD prepayment.
- Structure. Freddie Mac’s fixed-rate term sheet offers partial and full-term interest-only and supplemental loans; neither is available on a HUD loan, where a 241(a) supplemental is limited to repairs and additions.
- No MIP line item. HUD’s 0.25% annual premium is the statutory floor, but it is still on top of the note rate. Compare all-in costs; recent HUD note rates by program are on the rates page.
How to choose
- Size all three. Leverage and coverage decide most deals; let the lowest test pick the loan.
- Price all-in. HUD note rate plus 0.25% MIP, plus HUD’s 0.30% application fee and third-party reports, against the agency coupon and fees.
- Match the hold. If you may sell or refinance inside five years, a 223(f) is usually the wrong tool unless a buyer will assume it.
- Match the calendar. If a purchase contract has a fixed closing date, ask each lender for a realistic schedule in writing.
Also compare HUD with CMBS and with bridge loans.
Sources
- HUD Mortgagee Letter 2025-03, Multifamily changes in DSCR and LTV/LTC (Jan. 8, 2025)
- HUD MAP Guide, Handbook 4430.G, 2020 edition, sections 3.1.2-3.1.7, 3.7.10, 3.7.20
- 90 FR 45789, Changes in Mortgage Insurance Premiums for FHA multifamily programs (Sept. 23, 2025)
- Freddie Mac Multifamily, Optigo Fixed-Rate Loans term sheet (4/26)
- Fannie Mae Multifamily, Fixed-Rate Mortgage Loans term sheet
- 12 U.S.C. 1715n(f), Section 223(f) prepayment prohibition
Checked against these sources on October 31, 2026. HUD changes program rules by Mortgagee Letter and Federal Register notice; the lender's commitment governs any loan.
Short answers
Is Fannie Mae a HUD loan?
No. Fannie Mae and Freddie Mac are government-sponsored companies that buy or guarantee apartment loans made by their approved lenders. HUD, through FHA, insures loans made by HUD-approved MAP lenders and often funded through Ginnie Mae securities. They are separate programs with separate rules, though the same lender often offers all three.
Which is better, HUD or Fannie Mae, for an apartment refinance?
HUD wins on leverage and term when the deal is coverage- or value-constrained and the owner plans to hold: up to 87% of value at 1.15x, fixed and fully amortizing for up to 35 years. Fannie or Freddie wins on speed and flexibility: faster closings, interest-only options, shorter terms and no five-year statutory prepayment bar. Run both sizings before choosing.
Do Fannie and Freddie loans have mortgage insurance like HUD?
Not as a separate premium. HUD charges a 0.25% upfront and 0.25% annual MIP on every FHA multifamily program. Fannie and Freddie price their guarantee into the rate. Compare all-in cost, meaning note rate plus MIP for HUD, against the agency coupon.
Can I prepay a Fannie or Freddie loan more easily than a HUD 223(f)?
The mechanics differ. Freddie's fixed-rate term sheet uses yield maintenance, a two-year lockout after securitization and then defeasance, with the last 90 days open. Fannie's uses yield maintenance or a prepayment premium. HUD 223(f) has a five-year statutory bar, then a declining percentage penalty set in the note. Which is cheaper depends on rates at payoff.
Do Fannie Mae or Freddie Mac finance apartment construction?
Their standard fixed-rate products are for acquisitions and refinances of existing properties. HUD's 221(d)(4) program insures a single loan through construction and up to 40 years of permanent debt, which the agencies' standard fixed-rate products do not offer.