How Fannie Mae DUS® works

Fannie Mae sets the terms and underwriting and servicing standards for its multifamily agency loans. But it doesn’t underwrite or service mortgages. As the DUS name suggests, Fannie Mae delegates those tasks to approved private lenders, including JPMorganChase.

Each DUS lender sells mortgages to Fannie Mae, which can hold them in its portfolio or convert them to mortgage-backed securities for sale on the secondary market. 

The DUS lender’s role isn’t over when it sells the mortgage. A DUS loan borrower works with the same lender throughout the life of the loan. The DUS lender also retains a portion of the credit risk, ensuring all parties have a stake in the loan’s performance. 

DUS mortgage eligibility

Commercial real estate investors can seek a Fannie Mae DUS loan to purchase or refinance multifamily properties with at least five units, including: 

• Conventional and affordable apartment buildings
• Senior housing properties
• Student housing properties
• Manufactured housing communities

Properties must have stabilized occupancy—typically 90%—for 90 days before obtaining a DUS loan.  

Key DUS loan features

• Rates and proceeds: Lenders can often offer competitive proceeds and attractive rates with agency loans, including DUS loans. Fixed- and variable-rate options are available. 
• Term: Fannie Mae DUS loans can have a term as short as 5 years or up to 15 years. That can make them attractive for commercial real estate investors planning to keep an asset for an extended period.  
• Prepayment: Options include yield maintenance and declining prepayment premiums, though agency loans—including DUS loans—may come with larger prepayment penalties than bank loans. 
• Non-recourse: Non-recourse DUS loans are available, meaning a borrower wouldn’t be personally liable for their loan. However, there are exceptions, such as situations involving fraud.
• Assumption: If a borrower sells a property before the DUS loan’s term ends, the buyer may be able to assume the loan. 
• Consistent availability: Fannie Mae typically continues lending throughout real estate and economic cycles, making the agency a consistent source of capital. Fannie Mae also lends nationwide.  

Understanding a DUS lender’s financing options

DUS loans are typically just one type of multifamily financing a DUS lender will offer. The ideal financing choice will depend on an investor’s goals and where a property is in its lifecycle, but a few key differences between DUS and bank loans include: 

• Pre-stabilization options: Fannie Mae DUS loans are designed for stabilized properties, though the agency also selectively offers a lease-up program. Banks have other options for properties in development or undergoing repositioning, such as construction and value-add loans.  
  
• Flexibility with changes: Turning DUS loans into mortgage-backed securities helps Fannie Mae bring private capital to the mortgage market. But it can also make it more challenging for borrowers to access their property’s equity, construct new units and update the property during the loan’s term.
• Application process: Don’t be surprised if applying for a Fannie Mae DUS loan differs slightly from the applying for a bank loan—even when working with the same lender. A DUS lender will stick to Fannie Mae’s underwriting requirements on DUS loans but may have different processes and requirements for loans remaining on its balance sheet.

JPMorgan Chase Bank, N.A. Member FDIC. Visit jpmorgan.com/cb-disclaimer for disclosures and disclaimers related to this content.