Freddie Mac Small Balance Loan (SBL) Replaced by Optigo Conventional Small Freddie Mac Small Balance Loan (SBL) Replaced by Optigo Conventional Small

By Multi-Family USA Editorial Team · Reviewed by Josh Bauerle · Published 2026-10-07 · Updated 2026-10-08 · 11 min read

The short answer

If you searched for the Freddie Mac small balance loan, the program you are thinking of changed names and rules. On April 15, 2026, Freddie Mac Multifamily announced an integrated Conventional Small product under its core Conventional lending platform. Optigo lenders and trade press describe it as replacing the former Small Balance Loan (SBL) program, with only a short transition period for SBL applications after launch.

Optigo Conventional Small is a fixed-rate, non-recourse loan for Freddie Mac’s stated range of generally $2 million to $10 million, on predominantly market-rate properties of 5 to 50 units. Two things matter most if you used to quote SBL:

• The ceiling went up. SBL topped out at $7.5 million; Conventional Small goes to $10 million, according to Multifamily Executive and Walker & Dunlop’s summary of the redesign.
• The floor is now $2 million. There is no Freddie Mac small-balance product under $2 million anymore. Walker & Dunlop notes the $2 million floor creates a clearer line against Fannie Mae’s small loans, which it reports start at $1 million.

This page covers the terms, who the product fits, a worked example, and what to do if your loan is too small. Multi-Family USA is a lender-matching service, not a lender, so everything here is educational and should be confirmed against a current Optigo lender quote.

What changed from SBL to Conventional Small

Freddie Mac’s description is that Conventional Small moves the product into its core Conventional framework. Walker & Dunlop’s summary says the redesign consolidates certain documents and policies across the small- and mid-balance book, giving borrowers more familiar documentation and a more consistent servicing framework.

Freddie Mac has not republished the old SBL terms, so they are not repeated here. If a lender quotes you something that sounds like old SBL pricing or structure, ask whether it still applies.

For the comparable Fannie Mae rules, see Fannie Mae multifamily loan requirements.

Optigo Conventional Small terms at a glance

The terms below come from Freddie Mac’s April 2026 Conventional Small term sheet. Individual Optigo lenders add their own pricing, fees, and requirements, and Freddie Mac says terms are subject to change without notice.

Where the term sheet’s LTV grid and the shorthand “up to 80%” differ, the grid controls: a 5-year loan is capped at 75%, not 80%.

Two notes on how these terms work in practice:

• LTV and DSCR both constrain you. Your actual proceeds are the lowest of the LTV-limited amount, the DSCR-limited amount, and any lender or Freddie Mac adjustment for the property or market. At many rate levels, DSCR binds before LTV does, as the example below shows. The loan sizing calculator runs all three tests together.
• Borrower structure matters. Freddie Mac requires a Single Purpose Entity, and acceptable borrowers are generally an LP, corporation, LLC, or a tenancy in common with no more than five tenants in common, per the term sheet. See our entity structure guide.

Who Conventional Small fits

This product is a good candidate when most of these are true:

• Stabilized, market-rate apartments of 5 to 50 units with a clean rent roll, a trailing 12-month operating statement, and in-place NOI that supports a 1.25x amortizing DSCR.
• A loan between $2 million and $10 million. Typically that means a purchase or refinance of a roughly $2.5 million to $13 million asset, depending on leverage.
• A hold of 5 to 15 years. Longer fixed terms and non-recourse financing reward sponsors who plan to hold.
• Mixed-use with a residential majority, since Freddie Mac says the product supports eligible mixed-use properties.
• Sponsors who want rate certainty. The 60-day spread lock and the possible Index Lock option let you fix the most volatile part of the coupon, the Treasury index, early.

Who it does not fit

• Loans under $2 million. Freddie Mac’s term sheet floor is $2 million. See the next section.
• Heavy value-add or lease-up. Freddie Mac sells separate lease-up, value-add, and moderate rehab products. Conventional Small is a stabilized, fixed-rate execution. Compare with bridge and value-add financing.
• Excluded property types. Student housing, seniors housing, manufactured housing communities, and cooperative housing are excluded, per the term sheet.
• Ineligible characteristics. The term sheet lists fractured condos, vertical condos, Delaware Statutory Trusts, HAP contracts, master leases, ground leases, scattered-site portfolios, home-sharing, co-living, micro-units above 5%, and septic or well-water properties. Freddie Mac also says hard subordinate debt is not permitted.
• Short-term business plans. Yield maintenance and a post-securitization lock-out make an early exit expensive. If you might sell or refinance within three to four years, model the cost with the yield maintenance calculator.
• 50-plus units. Larger buildings are typically quoted on Freddie Mac’s core Conventional fixed-rate product rather than Conventional Small.

A worked example (hypothetical numbers)

This is an illustration with round numbers, not a quote and not a prediction. The interest rate is a placeholder; check live pricing on our rates page or with a lender.

Assume a stabilized 24-unit apartment building:

• Purchase price: $5,000,000
• In-place NOI after underwritten vacancy and expenses: $300,000 (a 6.0% cap rate; try the cap rate and NOI calculator)
• Loan: 7-year fixed, 30-year amortization
• Hypothetical interest rate: 6.00%

Step 1, the LTV test. At 80% LTV on a 7-year term, the cap is $4,000,000.

Step 2, the DSCR test. A 1.25x minimum on $300,000 NOI allows $240,000 of annual debt service, or $20,000 per month. A 6.00% loan with a 30-year amortization has a payment of about $5.996 per $1,000 borrowed per month, so $20,000 supports a loan of roughly $3.34 million.

Step 3, take the lower number. Proceeds are about $3.34 million, or roughly 67% of the $5 million price. The DSCR test binds, not LTV. The $4,000,000 LTV maximum would produce a payment of about $23,980 per month, a DSCR near 1.04x.

Step 4, check debt yield. $300,000 / $3,340,000 is about 9.0%. Freddie Mac’s term sheet does not publish a debt yield minimum, but lenders and investors watch it, so run it through the debt yield calculator.

What this means for the buyer. The equity check is about $1.66 million plus closing costs. A 0.1% application fee on $3.34 million is about $3,340; add lender, legal, appraisal, environmental, and engineering costs from the closing cost calculator. With the same NOI and a rate 50 basis points lower, proceeds rise noticeably, which is why rate lock timing matters.

Use our commercial DSCR calculator to rerun this with your own NOI and rate, or the multifamily mortgage calculator for payments and amortization.

Under $2 million? Your options

If your loan is below $2 million, you have realistic alternatives, and which one fits depends on your plan:

1. Fannie Mae Small Mortgage Loan. Fannie Mae’s Multifamily Guide defines a Small Mortgage Loan as one with an original loan amount of $9 million or less. Walker & Dunlop reports Fannie’s floor is $1 million. This is the closest agency substitute for Freddie’s old SBL in the $1 million to $2 million range, though you should confirm the current minimum, rates, and requirements with a Fannie Mae DUS lender. Compare with our agency stabilized overview and Fannie Mae small loan page.
2. Community bank, credit union, or regional bank. Balance-sheet lenders often write small multifamily loans, but term, amortization, recourse, and relationship requirements vary widely by institution, so compare several. See bank balance sheet loans.
3. Bridge or debt-fund loan. Useful if the property is not yet stabilized and you plan to refinance into agency or bank debt later. Many debt funds have minimum loan sizes above $2 million, so ask first. Floating-rate structures add rate risk; read our fixed vs floating-rate comparison.
4. Seller financing or assumable debt. Sometimes the cleanest route for very small deals, subject to legal review.
5. Wait and combine. If you are buying a second building, a larger combined loan may clear $2 million.

If you are not sure which route fits, request a deal review and we will route the file to lenders whose boxes match, without a credit pull.

How to prepare a Conventional Small package

Optigo lenders underwrite the same basics regardless of loan size, so a complete file prevents repricing late.

1. Normalize NOI. Use a trailing 12-month operating statement, current rent roll, and defensible expense assumptions. See NOI normalization.
2. Size to the binding constraint. Test DSCR, LTV, and debt yield together before you pick a price. The loan sizing calculator does this.
3. Confirm borrower structure early. SPE formation, key principals, and guarantor carve-out exposure take time.
4. Plan the exit. Yield maintenance until securitization and then defeasance are not cheap to unwind. See rate risk and refinance planning.
5. Budget escrows. Tax, insurance, and replacement reserves are generally required, which reduces cash flow available to you at closing and through the hold.
6. Quote more than one path. Our agency vs. bridge comparison and the broader Freddie Mac Optigo overview show how to compare.

Fannie Mae small loan vs Freddie Mac Conventional Small

Both are agency, non-recourse, fixed-rate options for small multifamily. The differences worth checking on your file:

• Size range. Freddie Mac: generally $2 million to $10 million. Fannie Mae: loans of $9 million or less qualify as Small Mortgage Loans per its Guide.
• Unit count. Freddie Mac describes 5 to 50 units for Conventional Small. Check Fannie’s current term sheet for its unit-count rules.
• Pricing and proceeds. Pricing varies daily and by lender, so quote both when the asset qualifies.
• Prepayment and lock-out. Freddie’s standard structure is yield maintenance, then lock-out, then defeasance; step-down costs extra. Fannie’s options are in its own term sheet.

Sources

Program terms on this page come from these primary and lender sources. Terms are subject to change; confirm with your lender.

• Freddie Mac Multifamily, Optigo Conventional Small term sheet (April 2026).
• Freddie Mac Multifamily, news page listing the April 15, 2026 announcement of the integrated Conventional Small product.
• Freddie Mac Multifamily, Sponsor Speed Reads, April 2026, introducing Conventional Small for loans from $2 million to $10 million.
• Fannie Mae, Multifamily Guide definition of Small Mortgage Loan ($9 million or less).
• Multifamily Executive, Freddie Mac to integrate small balance loans into its conventional platform (trade press; SBL range of $1 million to $7.5 million, SBL system retiring for new loans at the end of April 2026).
• Walker & Dunlop, Freddie Mac small balance redesign (lender summary; $7.5 million prior ceiling, $2 million floor).
• Regions Bank, Conventional Small program sheet and Greystone, Conventional Small term sheet (Optigo lender summaries, consistent with Freddie Mac’s sheet).

This content is educational and is not a commitment to lend. Multi-Family USA does not originate loans. Combine it with transaction-specific advice from financing, legal, tax, and accounting professionals.

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