Government sponsored enterprise (GSE) Freddie Mac has hit the $100-billion milestone in its securitization of multifamily mortgages as part of its “K-Deal” Multifamily Mortgage-Backed Securities program.
Freddie Mac launched the K-Deal program in 2009 to securitize mortgage loans backed by multifamily apartment properties, the vast majority of which support affordable rental housing. The program is also intended to attract private capital to the market and minimize taxpayer exposure to credit risk.
The program encompasses various types of transactions, including five-, seven- and 10-year term loans; floating-rate loans; single borrower loans; legacy portfolio loans; and seniors, student, military and targeted affordable housing loans.
Reflecting on the program’s six-year history, Freddie Mac Multifamily Executive Vice President David Brickman said, “In 2008 when we first started talking to investors about doing a CMBS-style securitization, some of them thought we were crazy.”
“The CMBS market had collapsed due to the financial crisis,” Brickman explained. “When the program began, we had to convince lenders that selling a loan to us for securitization was better, or at least not significantly worse, than selling us a loan that we would hold in our portfolio. Offering significantly better pricing for loans intended for securitization and redefining the securitized-loan servicing standard helped to convince them that it made sense.”
The program’s original goal was to do one K-Deal per month, but since 2011, Freddie Mac has done one deal every two to three weeks, Brickman said.
“They are underwritten, structured and priced in-house and our credit performance has not changed during that time. We have very low delinquencies and credit losses with about 1 basis point of loss on K-Deal securities issued to date,” he said.
As a result, “we ended up helping to revive the market through our K-Deal issuance,” Brickman said.
“Today we are one of, if not the largest, issuer of commercial mortgage credit in U.S. structured finance,” he said.