What is a T-12 in real estate?

A T-12 (Trailing Twelve Months) is an operating statement showing the last 12 months of income and expenses for a property. Lenders use it to calculate Net Operating Income (NOI) and determine loan amounts. Bhumi provides forensic T-12 audits that reconcile every line item to bank statements.

How long does a T-12 audit take?

Bhumi delivers a complete, lender-ready T-12 package within 48 hours of receiving your documents. Full forensic reconstruction typically takes 1-2 weeks. Deal closing support runs approximately 30 days.

What size multifamily portfolios does Bhumi work with?

Bhumi specializes in $500K to $5M multifamily portfolios with 5-50 units. This is the sweet spot where institutional lenders require documentation but owners often lack institutional-grade bookkeeping - too complex for most accountants, too small for institutional advisors.

What documents do I need to start a T-12 audit?

To start, Bhumi needs three things: 12 months of bank statements for all accounts touching the property, a current rent roll showing units, tenants, and rent amounts, and your most recent tax return or Schedule E for the property.

How much does a T-12 audit cost?

Bhumi charges a flat fee based on portfolio complexity - number of units, bank accounts, and document condition. No hourly billing surprises. Contact for a specific quote based on your situation.

What lenders does Bhumi work with?

Bhumi is lender-agnostic and has prepared packages for Freddie Mac Small Balance Loans, Fannie Mae Small Loans, regional banks, credit unions, and private lenders. The documentation standards are tailored to each lender's requirements.

What is NOI variance and why does it matter?

NOI variance is the gap between what your T-12 operating statement shows and what your bank deposits prove. Lenders require zero variance for loan approval. Bhumi's forensic reconciliation traces every dollar of revenue to a specific bank deposit, eliminating phantom income and protecting your loan amount.

Can Bhumi help with inherited real estate portfolios?

Yes. Bhumi specializes in inherited portfolios where the previous generation ran operations manually. We've handled portfolios with Venmo payments, cash deposits with no paper trail, commingled personal and business expenses, and decades of accumulated documentation gaps.

What is a credit exception in Freddie Mac underwriting?

A credit exception is formal approval to deviate from standard Freddie Mac Guide requirements. When a deal doesn't meet published criteria—DSCR below minimum, LTV above maximum, borrower with credit events—the lender must request an exception from Freddie Mac's credit committee. Exceptions aren't automatic; they require documented compensating factors and a compelling narrative.

When should I request a credit exception?

Request an exception when the deal has merit but doesn't check every Guide box. Common scenarios: strong property with marginally low DSCR, experienced borrower with an old credit event, high-quality asset in a market tier that limits LTV. Don't request exceptions for deals that are fundamentally broken—focus on deals where compensating factors outweigh the deviation.

What compensating factors help get credit exceptions approved?

Strong compensating factors include: significant borrower liquidity and net worth beyond minimums, excellent credit history aside from the specific event, property quality exceeding market standards, strong rent growth trends, below-market leverage despite the exception request, experienced property management, and long-term ownership track record with the specific asset.

How often do credit exceptions get approved?

Approval rates vary by exception type and lender relationship. Minor deviations (DSCR 1.18x vs. 1.20x minimum) with strong compensating factors get approved frequently. Major deviations (recent bankruptcy, DSCR below 1.10x) are rarely approved. Lenders with strong Freddie Mac relationships and track records of quality originations have better success rates.

Does requesting a credit exception affect my future borrower status?

A single approved exception doesn't negatively impact your status. However, patterns matter. Borrowers who repeatedly need exceptions may be flagged as higher risk. More importantly, exceptions that perform poorly (the loan defaults) damage both your reputation and the lender's relationship with Freddie Mac. Request exceptions selectively.

Credit Exception: When the Numbers Don't Work

Definition

Credit Exception: Formal approval from Freddie Mac to proceed with a loan that doesn't meet one or more standard Guide requirements, granted based on compensating factors and documented justification.

Your deal is 90% there. The property is strong, the borrower is solid, the market is good—but the DSCR comes in at 1.18x instead of the required 1.20x. Do you walk away from an otherwise fundable deal? Not necessarily. This is where credit exceptions come in.

What Triggers the Need for a Credit Exception?

Exceptions are required when a deal deviates from published Freddie Mac Guide requirements:

Exception Category	Example Deviation	Approval Difficulty
DSCR	1.18x vs. 1.20x minimum	Moderate (if marginal)
LTV	77% vs. 75% market tier limit	Moderate
Credit Events	Bankruptcy 5 years ago (vs. 7-year lookback)	Difficult
Property Type	Student housing concentration	Very Difficult
Market	Declining market with negative trends	Very Difficult
Borrower Experience	First-time multifamily owner	Moderate

Key Point

Not all exceptions are created equal. A marginal DSCR shortfall with strong compensating factors is very different from a recent bankruptcy with weak financials. Know which battles to fight.

The Credit Exception Request Format

Your lender prepares the exception request, but you provide the ammunition. A strong request includes:

1. Clear Statement of the Deviation

What specific Guide requirement isn't met, and by how much?

Weak: "DSCR is below minimum."

Strong: "DSCR of 1.18x is 2 basis points below the 1.20x minimum for Standard Markets. At the requested loan amount of $4,200,000, the DSCR shortfall equates to approximately $8,400 in annual debt service coverage."

2. Root Cause Explanation

Why does the deviation exist? Is it temporary or structural?

Weak: "Rents are below market."

Strong: "Current rents average $1,050/unit versus market rents of $1,175/unit. The property was acquired 18 months ago with significant deferred maintenance. Borrower has completed $450,000 in capital improvements and is executing a rent increase program. Average rent has increased $75/unit in the past 6 months with no increase in vacancy."

3. Compensating Factors

What strengths offset the weakness? Be specific and quantify:

Compensating Factor	Weak Presentation	Strong Presentation
Borrower Liquidity	"Borrower has strong liquidity"	"Post-closing liquidity of $2.4M (18 months debt service) vs. 9-month minimum"
Net Worth	"Substantial net worth"	"Net worth of $8.2M (195% of loan amount) vs. 100% minimum"
Track Record	"Experienced operator"	"12-year ownership history with 0 defaults across 847 units in 6 properties"
Property Quality	"Well-maintained property"	"PCA identified $45,000 immediate repairs on a $6.2M asset (0.7% of value)"

4. Mitigating Structures

What deal terms reduce risk?

Lower leverage: "Requesting 72% LTV despite 75% eligibility"
Additional reserves: "Borrower agrees to 18-month operating reserve"
Recourse carveouts: "Expanded recourse provisions for first 24 months"
Interest rate buydown: "Accepting 15 bps rate premium"

Common Exception Types and Strategies

DSCR Exceptions

The most common exception request. Strategies that work:

Rent growth narrative: Document below-market rents with clear path to market
Expense reduction: Show specific expense savings from operational improvements
Conservative underwriting offset: If lender underwrote aggressively on vacancy or expenses, show actuals
Liquidity cushion: Significant post-closing liquidity (12+ months debt service)

Warning

Don't request DSCR exceptions on properties with structural income problems (declining market, obsolete product, tenant concentration). Freddie Mac distinguishes between "numbers that will improve" and "numbers that are what they are."

LTV Exceptions

Less common because LTV limits are firm. When they work:

Appraisal timing: Value has increased since appraisal due to documented improvements
Conservative cap rate: Appraiser used higher cap rate than comps support
Recent comparable sales: Market has moved since appraisal

Credit Event Exceptions

Borrowers with historical credit events face the borrower interview and often need exceptions:

Credit Event	Standard Lookback	Exception Considerations
Bankruptcy	7 years	Business vs. personal, cause, recovery demonstrated
Foreclosure	7 years	Strategic vs. distress, different asset class, market conditions
Deed-in-Lieu	7 years	Negotiated resolution vs. default, lender relationship
Loan Modification	3 years	Temporary hardship, current performance

For credit events, the narrative is everything. A bankruptcy caused by a business partner's fraud, followed by 5 years of clean credit and successful operations, tells a different story than serial financial mismanagement.

The Exception Approval Process

Step 1: Lender Pre-Screen

Your lender evaluates whether the exception is worth requesting. They won't waste Freddie Mac's time (and their relationship capital) on long-shot requests.

Step 2: Exception Memo Preparation

The lender's underwriter prepares a formal Credit Exception Memo including:

Deal summary and exception requested
Detailed compensating factors
Risk analysis and mitigants
Lender recommendation

Step 3: Freddie Mac Credit Committee Review

The exception goes to Freddie Mac's credit team. Timeline varies:

Minor exceptions: 3-5 business days
Significant exceptions: 5-10 business days
Complex/multiple exceptions: 10-15 business days

Step 4: Decision

Three possible outcomes:

Approved: Exception granted, proceed with loan
Approved with conditions: Exception granted if specific mitigants implemented
Declined: Exception denied, restructure deal or find alternative financing

Building Relationships for Future Exceptions

Exception success isn't just about the individual deal—it's about track record:

What Helps

Performing loan history: Your previous Freddie Mac loans paying as agreed
Clean exception track record: Past exceptions that performed well
Lender relationship: Working with a Seller/Servicer that has strong Freddie Mac standing
Transparency: Full disclosure of issues, no surprises

What Hurts

Repeated exception requests: Pattern of deals that don't meet criteria
Exceptions that defaulted: Previous exceptions that went bad
Incomplete disclosure: Issues discovered that weren't disclosed upfront
Adversarial approach: Fighting the underwriter instead of working together

Key Point

Your reputation follows you. Borrowers known for quality deals that perform get more benefit of the doubt than borrowers known for pushing boundaries on every transaction.

When NOT to Request an Exception

Some deals shouldn't be fought for:

Fundamental property problems: Declining market, obsolete product, environmental issues
Multiple major exceptions: Needing exceptions on DSCR, LTV, AND credit events
Recent/severe credit events: Bankruptcy in past 3 years, active litigation
Structural issues: Problems that won't improve (bad location, shrinking tenant base)
Weak compensating factors: Nothing to offset the deviation

Know when to pivot to alternative financing (bridge loans, bank debt, private lenders) rather than forcing a square peg into a round hole.

Insider Terminology

Credit Exception Memo

Formal document prepared by the lender requesting deviation from Guide requirements. Includes deal summary, exception requested, compensating factors, and lender recommendation.

Compensating Factors

Strengths that offset weaknesses in the deal. Strong borrower liquidity, excellent property condition, below-market leverage, and experienced management are common examples.

Variance

The degree of deviation from standard requirements. A 2% DSCR variance is more approvable than a 15% variance.

Guide Waiver

Another term for credit exception. Formal approval to waive specific Guide requirements for a particular transaction.

Underwriter Discretion

Limited flexibility underwriters have within Guide parameters. Some minor items don't require formal exceptions; others have no discretion.

Key Takeaways

Bottom Line

Exceptions exist for good deals with minor issues: Not for fundamentally broken deals
Compensating factors are everything: Quantify strengths that offset the deviation
Narrative matters: Especially for credit events—tell the story clearly
Track record builds credibility: Past performance influences future exceptions
Know when to walk away: Some deals aren't worth the exception fight