MCLEAN, VA--(Marketwired - Oct 9, 2014) - Freddie Mac (
"We believe our initiative will increase liquidity in the small multifamily loan space and provide stability and facilitate private capital investment in this somewhat fragmented and underserved market segment," said David Brickman, Freddie Mac Multifamily Executive Vice President. Historically, local lenders have financed small multifamily properties, and debt capital is not widely available across the country from national lenders with standard products. We anticipate the average loan to be about $2.5 million and hope to grow our volume in the market segment every year."
Brickman added, "With this country's growing gap between affordable housing demand and supply, it is critical to provide financing for smaller loans and properties, especially since this market segment disproportionately serves lower income renters."
About 29% of the multifamily loan market is comprised of smaller loans with an average loan size of $1.2 million, based on 2012 data from Trepp.
The initiative provides approved lenders with a dedicated platform to originate and sell loans on smaller rental properties. Freddie Mac has a designated Small Balance Loan team for the production, pricing, underwriting, closing, purchasing and funding of these loans.
The securitization will be similar to the K-deal securitization structure, in which Freddie Mac sells the first loss risk to private capital. For a Small Balance Loan securitization, the collateral will be comprised of small balance loans, and the originating sellers must purchase the subordinate bonds on their loans, which they can then sell in whole or in part to third party investors.
To date, Arbor Commercial Mortgage, Greystone Servicing Corporation and Hunt Mortgage Group are approved to sell these loans to Freddie Mac. Additional lenders will be added as they are approved.
Small Balance Loan Terms:
- Loan amounts of $1 - $5 million for acquisition or refinance
- Partial or full term interest only available
- Up to 80% LTV
- 1:25x debt service coverage ratio minimum, and 1.20x in top markets
- 60-120 day rate lock
- Hybrid ARMs or fixed-rate balloon mortgage
Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation's residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Today Freddie Mac is making home possible for one in four homebuyers and is one of the largest sources of financing for multifamily housing. www.FreddieMac.com. Twitter: @FreddieMac