W&D First to Try Freddie Mac's New Affordable Housing Execution

McLEAN, VA—Walker & Dunlop is the first seller-servicer to execute on an alternative affordable housing product that Freddie Mac announced it was rolling out earlier this year. The program, called Direct Purchase of Tax-Exempt Loans, is a variation on the 4% Low-Income Housing Tax Credit structure that promises to significant reduce the cost of these transactions.

The inaugural transaction was a $14.2 million loan originated by Walker & Dunlop for The Lakewoods, a 417-unit affordable, senior-housing community in Dayton, OH, for Millennia Housing Development.

The Walker & Dunlop team, led by Frank Baldasare, structured the acquisition rehab loan with a 16-year fixed-rate and 35-year amortization.

By the end of the year this will be an active product line for Freddie Mac, predicts Shaun Smith, senior director, Targeted Affordable Production with Freddie Mac. "These types of deal take a long time to close and it just so happens this was the first one to close," she tells GlobeSt.com.

"We have several more slated for the end of the year," she says.

Freddie Mac's Direct Purchase of Tax-Exempt Loans initiative was introduced after The Lakewoods had been initially underwritten, which is partly why it was the first transaction.

Smith is also predicting that this execution will eventually replace the 4% LIHTC structure because of its cost savings. "It is just a better mousetrap," she says.

With many 4% LIHTC bond executions, costs can run up depending on the number of players involved. The Direct Purchase of Tax-Exempt Loans, however, is a direct placement with the GSE, making it far more cost efficient.

Smith says the GSE has calculated it could bring down costs with a transaction by 40%.

Eventually Freddie Mac plans to aggregate and securitize these bonds through its M shelf, she adds.

Last week, Walker & Dunlop was the first to originate a loan through Freddie Mac's new manufactured housing finance program that it announced at the end of April.