What's Up With Freddie Mac's Small MF Securitizations?

McLEAN, VA—There it is again. Another announcement from Freddie Mac in my email inbox, announcing it will guarantee a pool of multifamily loans in a securitization structure. This, of course, is Freddie Mac's mission. What stands out about this announcement is that it is for its small balance multifamily loan securitization platform, which only began actively securitizing these loans in August of this year, several months after launching the lending program.

The securitization announced this week is its third since August and its first including seasoned small balance loans.

As a refresher, the small balance multifamily loan program purchases loans ranging between $1 million and $5 million for properties with at least five units and then securitizes them when the pool size reaches about $100 million to $125 million. There is a designated team for the production, pricing, underwriting, closing and funding of these loans. They are structured similarly to Freddie Mac's better known K-Certificates.

For this latest deal, Freddie Mac is guaranteeing some $193 million in SB Certificates, which have just priced and will settle on or about September 23, 2015.

A spokesperson from the GSE says the reason for the back-to-back securitizations is that it now had ten lenders that are working with the program and they are ramping up production quickly. When they hit $100 million in small balance loans Freddie Mac takes the securitization to market.

"The first two securitizations had loans that were underwritten and purchased by Freddie Mac at the time of origination, and the third one was unique in that it was a pool of seasoned loans that Freddie Mac acquired," she told GlobeSt.com.

Renter demographics explain why production has ramped up so quickly. "About one-third of renters live in smaller apartment communities with 5 to 50 units, which predominantly serve working individuals with lower incomes," the spokesperson says. "There is a market demand to finance these properties and securitization provides access to the capital markets."