NEWPORT BEACH, CA—Sabal Financial Group L.P. has built its business on small-balance loans and has found success in this less-traveled area of commercial real estate lending. As GlobeSt.com reported last week, the firm has been approved by Freddie Mac as a seller/servicer in its new small-balance loan offering, which offers debt solutions for multifamily acquisitions and refinancing. Sabal is one of only six eligible seller/servicers approved by the GSE for the new program and will offer non-recourse mortgages ranging from $1 million to $5 million to eligible borrowers nationwide.

We spoke with Sabal's CEO Pat Jackson about this lending niche, why the firm decided to go this route and what this new relationship with Freddie Mac Multifamily means for the company and the industry.

GlobeSt.com: What's so special about the small-balance loan market?

Jackson: We built our entire business around it. We think it's generally underserved. Historically, it has been served by community and retail banks, and in most cases they haven't come back yet. Our SNAP web-based technology fully separates us from others in the marketplace. It allows us to take a transaction from initial interest in a loan all the way through funding. There are huge efficiencies in this, and that's what's been lacking. Frankly, we like the risk profile of small balance.

GlobeSt.com: What are the challenges in this market, and how are they being met?

Jackson: The biggest challenge is doing it efficiently. Everybody wants to do large loans and nobody wants to do the small stuff because it's not a lot of dollars per transaction. So, not a lot of shops have made the investment or infrastructure to do it efficiently. It's like the portfolio theory—if you get enough crumbs together you can have a feast.

GlobeSt.com: What is your relationship with other GSEs, if any?

Jackson: None. We are specifically doing this with Freddie Mac. They have a number of programs, but what was very appealing to us about Freddie—and what was appealing to Freddie about us—is this new small-balance loan initiative they've come out with, which is a perfect fit for us and our entire business model. It's a wonderful addition to our product offering in the marketplace. It wasn't like we had to build everything up from scratch. When they looked at our profile, they realized we were the guys they wanted to have in this initial rollout. At the end of the day, they need to be successful with the rollout, and we have all the pieces in place to provide real volume to help them meet their initiatives. We couldn't be more delighted to be a part of this initial wave of seller/servicers under the Freddie program. It falls under the social thing of helping to provide people with a place to live, and it helps out the affordable-housing sector.

GlobeSt.com: What else should readers know about the multifamily lending market as we move further into the new year?

Jackson: In one respect, that market continues to be really robust. It's been the darling of investors for a while now in the CRE space. Banks have historically been much more comfortable offering multifamily credit than the other sectors—the community and regional banks, that is. A big chunk of what we funded in 2014 was multifamily, and while pricing has been pretty fierce, investors still put a high value in other pieces of the solution. We've been able to offer not just a great price, but a highly efficient system, and we're pleased with what we've been able to do.

Multifamily will continue to be robust, I think, and with the improving markets and economic situation, there will be a continued need for multifamily and new homes, which is a separate business for us. People are finally moving out of their family's basement, which bodes well for lenders in single family and multifamily. There is a tremendous number of people who typically would have gone into a new household that have not done it over the last five or six years. People are starting to feel more comfortable moving out, so there will be increased demand for that. We will continue to see strength in that space, aggressive pricing from lenders to meet the needs of investors and probably an increase in construction as well.