Freddie Mac announced last week a new lending platform forapartment owners looking to refinance their debt. Working withexperienced players in the industry, McLean, VA-based company willhelp provide mezzanine financing on certain multifamily firstmortgages it buys. The move will greatly benefit apartment ownerswith good credit who are underwater on their mortgages and cannotobtain refinancing at the same leverage levels as a few yearsago.The intent, stated Freddie Mac Multifamily SVP Mike May, is toreduce the number of properties that may go into default orforeclosure, or go through a drawn-out workout process.Here's how it works: Freddie would originate a firstmortgage with a fixed rate and an LTV of up to 75%, with the mezzlender providing another 15% maximum at either or fixed or floatingrate. Freddie would then buy the eligible senior loans from theseller/servicers and either keep them on their books or securitizethem. The mezz debt won't be backed by the property, but rather,the borrower's equity-reducing the risk to Freddie. The mezz lendercan also bid on the b-piece of the securitized first mortgage.Willthis new program have its intended effect? I think so. After all,Freddie Mac and its larger cousin, Fannie Mae, have become thego-to-and, in some cases, the only-sources for apartment financingthese days. With so few players operating in the financing arena,let alone experienced, reliable ones, why not go to the sourceyou're comfortable with? I'm pretty certain we'll be seeing a slewof Freddie Mac refinancings over the next several quarters.But themove does bring up some thoughts. For instance, does this somewhatincrease the risk Freddie is taking on, especially given theuncertainty and stagnation in the market? What about the terms-willthey be competitive, or should borrowers expect to see morecautious figures on this mezz debt? Will this just prolong thedownturn by dragging down the inevitable write-downs propertyowners must take? And how does it impact the dynamics of theproperty markets, since similar product isn't available for assetclasses outside of multifamily?

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