Freddie Mac surpassed a major milestone this week — and you're the winner.
We have issued more than $200 billion in K–Deals and SB–Deals, which has helped us finance about 2.7 million apartment homes across the country, while shifting risk away from U.S. taxpayers.
What are K– and SB–Deals?
Most of the loans on the apartment properties that we purchase are bundled into K–Deal securities, with smaller loans of $1 million to $6 million bundled into SB–Deals. These securities are sold to private investors, who take on much of the risk should the loans default. This reduces our—and the taxpayers'—exposure. As a result, Freddie Mac can purchase more loans, which provides lenders with more funds to support additional rental housing.
About 90 percent of the apartment–property loans we buy are packaged into K– and SB–Deals, and the resulting securities are sold to private investors — putting the investors in a first–loss position. In this way, we shield our business and, by extension U.S. taxpayers, from the vast majority of the credit risk. Our business model is often cited by policymakers and experts as the future of housing finance.
"The significant growth and evolution in our K–Deals have led to fundamental changes in multifamily housing finance," EVP Multifamily Business David Brickman said. "In short, the K–Deal has allowed us to expand the amount of private capital flowing to multifamily apartment properties nationwide, keep rents affordable, and minimize taxpayer exposure to risk."
The K–Deal program began in 2009. We issued two K–Deals that year, reflecting about $2 billion in loans on multifamily properties. Today, we issue a K–Deal every couple of weeks. As the K–Deal's popularity with investors grew, we created additional structures for transferring our risk. One result was the SB–Deal, which launched in 2015.
The innovation continues. We continually develop new ways to transfer our credit risk away from taxpayers. That said, they're a sound investment — they've had virtually zero credit losses.
Check out this short video, which illustrates the program's success:
To learn more, read the Viewpoint by Robert Koontz, vice president of Multifamily Capital Markets.
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