Freddie Mac Expanding into Tax-Exempt, Manufactured and Senior Housing Loan Buys
GSE Expanding its Funding Imitative for Affordable Housing and Senior Care
May 15, 2014
Even as Congress begins debating Freddie Mac’s future - as well as that of other government sponsored housing entities - the company announced plans to expand its reach into the affordable housing sectors and issued new senior housing bonds.
Freddie Mac has initiated its the direct purchase of tax-exempt loans to help keep rental housing affordable for lower income families and increase cost-effective financing for tax-exempt multifamily properties.
In addition, it plans to provide more capital for affordable rural housing, by beginning to purchase and securitize manufactured housing community (MHC) loans. These will be commercial loans made to the community owners who own the land on which the homes reside.
“Freddie Mac is further reducing its credit risk by securitizing more of its targeted affordable business volume and helping to increase access to credit for affordable rental housing borrowers,” said David Brickman, Freddie Mac Multifamily executive vice president.
The initiatives fit into the Federal Housing Finance Administration’s strategic goals for Fannie Mae and Freddie Mac’s multifamily loan purchases.
FHFA’s 2014 strategic plan provides additional capacity for affordable multifamily projects. And its focus includes multifamily lending for small properties and manufactured housing rental communities.
Freddie Mac Multifamily now will purchase from its Targeted Affordable Housing (TAH) lender network multifamily tax-exempt loans, and aggregate and securitize them into a new series called M-Deals.
These are tax-exempt loans issued by a city, county or state housing finance entity for apartments that have affordable rents for lower income individuals. This new execution provides another option for TAH Seller/Servicers and borrowers that is more efficient and costs less than publicly offered credit enhanced bonds.
“Through our M-Deals, we will shift taxpayer risk to private investors who will have a first loss position,” Brickman said. “We are creating an agency alternative for investing in tax-exempt bonds whose collateral is from multiple borrowers.”
According to Kimball Griffith, Freddie Mac Multifamily vice president of affordable sales and investment, the changes can lower a borrower’s issuance costs and ongoing cost of capital as well as simplify the closing process. She said the alternative financing option is expected to be particularly attractive for 4% Low-Income Housing Tax Credit (LIHTC) developments.
Manufactured Housing Communities
“Manufactured housing communities are an affordable housing option for many low-income individuals, especially in rural communities where affordable apartments are less prevalent,” Brickman said. “Our financing can help to increase debt capital to rural areas and help provide housing options for underserved populations. Nearly half of nation’s manufactured homes are located in rural, non-metropolitan areas.”
Freddie Mac initially will work with a few established MHC-experienced lenders in its network and add additional lenders later this year.
Eligible properties will be stabilized, high quality, professionally-managed communities owned by experienced operators.
Prices Multifamily Seniors Housing Securities Offering
Separately, Freddie Mac this month priced a $326 million securities offering of backed exclusively by LIBOR-based, floating rate multifamily mortgages with five-, seven-, and 10-year terms on seniors housing properties.