Supplemental sizing tests three constraints: (1) combined LTV (existing senior plus supplemental) against current appraised value, typically capped at 75% to 80%; (2) combined DSCR including the supplemental's debt service, typically minimum 1.25x; (3) program-specific seasoning (typically 12 months from senior origination) and other eligibility rules. The supplemental sizes to the binding minimum.
Worked supplemental sizing example
Setup: existing $20M Fannie DUS senior at 70% LTV against $28.6M original appraised value, originated 18 months ago. Property has appreciated to $34M current appraised value. NOI grew from $2.0M to $2.4M. Sponsor wants supplemental.
Test 1, combined LTV against current appraised value. Maximum combined LTV typically 75%. 75% × $34M = $25.5M maximum combined balance. Existing senior is $20M; maximum supplemental is $5.5M.
Test 2, combined DSCR. Minimum 1.25x typically. Existing senior debt service approximately $1.32M annually (varies by rate). Maximum total debt service at 1.25x DSCR on $2.4M NOI = $1.92M. Maximum supplemental debt service = $1.92M − $1.32M = $600K. At a supplemental rate of 6.5% on a 30-year amortization, $600K of debt service supports approximately $7.9M of supplemental balance.
Test 3, seasoning and eligibility. The 12-month seasoning is met (18 months elapsed). Program eligibility requires no material default events on the senior and acceptable property performance.
Binding test: Test 1 (combined LTV) is the binding constraint at $5.5M; Test 2 would have allowed up to $7.9M; Test 3 is met. Supplemental sizes to $5.5M.
Sources
- Delegated Underwriting and Servicing (DUS) program disclosures · Fannie Mae · current
- Optigo lending program disclosures · Freddie Mac Multifamily · current
- Multifamily Market Commentary · Fannie Mae Economic & Strategic Research · 2026-Q1