McLEAN, VA—Freddie Mac has debuted a new offering for multifamily security investors that it expects will help it further bring down liabilities on its balance sheet. It is called a 55-Day Participation Certificate pass-through security. The first offering to launch on this platform is a single-class security backed by one fixed-rate multifamily mortgage loan of approximately $17 million that will settle on March 24, 2015.
The 55-Day PC will be offered to the market through competitive bidding with a Freddie Mac guarantee.
"This is the first-ever offering of a 55-day PC, Victor Pa, Freddie Mac vice president of Investments and Advisory, tells GlobeSt.com. It will be a familiar product to investors, akin to the senior tranche of a K-certificate, he says. "They are, in fact, very interchangeable."
The product, which is expected to draw the same investors in the senior tranche K-deals is more a story about how Freddie Mac continues to seek to improve its balance sheet. Some 90% of the loans it makes are placed into the K-Certificates, leaving about 10% of the loans on the GSE's balance sheet. "Our goal is to reduce our balance sheet, which reduces risk to shareholders," Pa says. Pa says the GSE will issue a few of these each year.
Freddie Mac started to work on this structure a couple of years ago and in 2014 issued a PC internally. "We wanted to test out the system to make sure it worked properly," Pa says.
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