Freddie Mac Unveils New MBS Offering

MCLEAN, VA—Freddie Mac and Fannie Mae have been stretching their respective offerings to accommodating shifting demands in the multifamily capital market. Freddie Mac, however, may have surpassed even the most ambitious expectations for the GSEs with its latest offering.

It has unveiled a new mortgage-backed security it is calling Q Certificates. These are Structured Pass-Through Certificates backed by multifamily loans not underwritten by Freddie Mac at the time of origination but that meet the company's current underwriting standards.

The company expects to issue approximately $189 million in Q Certificates, which are expected to price next week and settle on or about Nov. 20, 2014.

Freddie Mac expects it will execute a few Q-deals a year, according to Mitchell Resnick, vice president of Freddie Mac Multifamily Capital Markets.

The loans were originated by Wells Fargo Bank, National Association, Bank of America and JPMorgan Chase Bank and are being sold by Impact C.I.L., LLC.

It is another affordable housing play for the GSE as the loans are backed by properties with rents that are affordable to those with low and very low incomes.

The securities are also designed with a certain measure of flexibility, featuring such investor options as guaranteed senior and interest only bonds as well as unguaranteed mezzanine, subordinate and interest only bonds.

For example, in the current transaction, Freddie Mac is purchasing and guaranteeing the senior bonds, but may purchase certain other bonds in future Q-Deal transactions, Resnick says. Meanwhile the unguaranteed subordinate bonds will continue to be sold to private investors, as is the practice in Freddie Mac's K-Deal program, he says.

The Q-001 Certificates are guaranteed by Freddie Mac and are backed by 124, affordable, multifamily mortgages underwritten by Impact Community Capital.

The Q-001 Certificates include three senior principal and interest classes and two senior interest only classes.