What We Do
We Finance Rental Housing
We provide mortgage funding for apartment loans throughout the nation, purchasing loans from a network of lenders and then securitizing these loans. Our fundings span the nation, including large metropolitan areas, mid-market cities and smaller communities. And the properties we finance house a wide array of renters, including students, single professionals, working families and senior citizens.
We Help Prevent Liquidity Shocks
We maintain our market presence in good economic times and bad, ensuring that residential mortgage markets do not suffer from sudden and dramatic reductions in liquidity. In short, we are there when we are most needed. We achieve this goal by operating in an accordion-like manner: expanding when other funding sources reduce their activity or exit the market, as typically occurs during times of economic distress, and contracting when market conditions improve and additional funding sources return to the market.
We Support Affordable Housing
In many ways, our Multifamily business is an affordable housing business. Almost every loan we finance supports affordable rental housing. Historically, roughly 90 percent of the loans we finance in any given year support low- and moderate-income households who earn no more than area median income. Because we tend to have lower borrowing costs than certain other funding sources, we help keep financing affordable for many properties that otherwise would have difficulty securing funding, including aging properties, those in need of capital improvements and apartments in smaller communities.
We Shield Taxpayers from Risk
We don’t share credit risk, we get rid of it. First, we securitize almost all loans rather than holding them in portfolio. Second, we structure our K-deal mortgage securities in a manner that places private capital in a first-loss position, exposing our business, and by extension U.S. taxpayers, to virtually no credit risk. How? K-deals include senior bonds we guarantee and subordinate bonds we do not, all backed by the same loans. Subordinate bonds are held by private investors and bear the risk of initial losses, in effect creating a shock absorber for senior bonds. That’s a business model policymakers point to as the future of housing finance.
Our Business Results
We have weathered the Great Recession and its after-effects better than most. That’s been due to sound credit underwriting, experienced people and smart business choices. When it comes to credit results, few have a better story. During the recession, our loan delinquencies peaked at 26 basis points (bps), while delinquencies in commercial mortgage backed securities soared to 1,215 bps. Moreover, while others suffered deep financial losses, our Multifamily business has produced several billions of dollars in income since 2008. Today, our delinquencies remain among the lowest in the industry, and our business remains strong. A sound operating business enables us to maintain a constant market presence, support affordable housing and attract high demand for our mortgage securities.
Our Market Contributions
The rental housing market relies on Freddie Mac Multifamily to provide support nationwide. See how we've been doing.