Assumable commercial mortgages

Buyers ask about an assumption because the note already on the building was written in an earlier market, and a brand-new loan would be a different coupon, a different prepay, and a different amount of paperwork. That desire does not create a right. A commercial note often has a due-on-sale clause: if the property transfers without consent, the lender can call the loan. If the documents do allow an assumption, the buyer still has to be approved, and the approval can be refused. Capital Market Funds does not control the servicer. We arrange new financing when an assumption is unavailable or is the wrong tool.

Fannie Mae's Multifamily Asset Management form for transfers and assumptions, Form 4636.TA, says the borrower must obtain prior lender consent for a proposed transfer or assumption unless the loan documents explicitly permit it. The servicer may approve only the cases the form delegates. If a question on that form is answered yes, Fannie Mae's own approval is required. Even a transfer the documents permit still requires notice so the records can be changed. Freddie Mac, life companies, and CMBS servicers have their own versions of the same idea. Do not assume a Fannie Mae form governs a conduit loan.

What the buyer and the seller should expect

The servicer underwrites the new borrower: experience, credit, and sometimes a new guaranty. Expect a fee. The amount is in the loan documents or in the servicer's quote. This page does not state a fee. Expect a review of the property, not only of the buyer. A transfer of ownership interests in the borrowing entity can be an assumption even when the deed never changes hands. The form calls that an ownership-interest transfer. Sellers who 'just add a partner' should read that definition before they sign an operating-agreement amendment.

An assumption keeps the existing prepay, the existing maturity, and the existing balance. It does not reset the balloon date. If the loan matures in eighteen months, the buyer has inherited an eighteen-month problem. If the buyer needs more proceeds than the current balance, an assumption does not create cash-out. That is a new loan, or a second lien the existing documents may forbid. Read the assumption package for whether the original carve-out guarantor is released. A release that is not signed is not a release.

When a new loan is the real request

If the servicer says no, or the fee and the remaining term make the old note unattractive, the buyer needs a new acquisition loan. That path is acquisition financing or, when an Arizona note is being replaced, Arizona commercial refinance from the seller's side and a purchase loan from the buyer's side. Permanent options, once the building is stabilized, are on Arizona permanent loans. Agency executions we arrange are placed with the lender that can actually approve the assumption or the new loan. Capital Market Funds is not a Fannie Mae DUS lender and is not the servicer.

We will not tell a buyer the old rate transfers. We will not tell a seller the guarantor is released. Both of those sentences belong to the servicer's approval letter. Craig Hoebing can compare an assumption quote, if you have one, with a new-loan quote. The comparison uses the numbers the servicer and the new lender actually gave you. License: Arizona CMB-1047342, NMLS 1445066.