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In an effort to become more competitively involved in the smallbalance loan market and to further support affordable housing,Freddie Mac on October 9, 2014 launched a Small Balance Loan Platform (“SBL”)to purchase and securitize small multifamily loans. In orderto maintain a level of quality in securitization, the originatingseller/servicer will be obligated to purchase the B-pieces securedby their underlying loan, which in turn can be sold to otherinvestors. As of this posting, they have a growing pipelineof deals between $90-$100 million. While most are in theearly stages of quoting loans, many deals are under application andin the underwriting phase. Freddie Mac states that theprogram is designed to “increase liquidity in the small balancespace and provide stability in this somewhat underservedmarket.” Small loans are estimated to comprise almost 30% ofthe multifamily market. Freddie's entrance into this spacemirrors the increased focus on small balance loans in Fannie Mae's 2.0 guidelines that are to go live by theend of the year.

While the securitization of loans through Freddie's Small LoanProgram is similar to a standard Freddie securitization structure,a number of changes have been made to underwriting requirementsthat lenders and their borrowers should be aware of.

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