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Multifamily Viewpoints

Our New Small Balance Loan (SBL) Offering

By Nashwa Moussa*
Published on October 9, 2014

Today, October 9, 2014, Freddie Mac Multifamily publically announced our new Small Balance Loan (SBL) offering.  We believe this offering, specifically designed to meet the long-term debt capital needs of small rental property borrowers nationwide, will increase liquidity in the small balance space and provide stability in this somewhat underserved market.

Recent research indicates that the small loan market comprises about 29% of the multifamily market, and is currently served primarily by many local and regional financial institutions. Unlike the larger loan market where GSE presence is strong, the small loan market has limited secondary lending support and is often subject to volatility and greater instability during market downturns and dislocations.

With this in mind, Freddie Mac Multifamily and my SBL team set out nearly eight months ago to develop a comprehensive, competitive SBL offering that we now think will be a game changer for Seller/Servicers, borrowers and investors.  We made this priority number one and vowed that we were going to do it right. Doing it right meant:

  • Designing an offering that leveraged our existing strengths, while taking into account the unique needs and challenges of this market in order to expand liquidity.
  • Creating a partnership structure with experienced SBL Seller/Servicers in order to ensure alignment of interests.
  • Establishing a dedicated platform to source, underwrite, purchase and securitize SBLs, using resources across different areas of Freddie Mac Multifamily, including the regions and other areas that support the division.
  • Ensuring streamlined and standardized pricing, credit parameters, underwriting and servicing and legal standards, and bringing consistency and transparency to the market.

To date, Arbor Commercial Mortgage, Greystone Servicing Corporation and Hunt Mortgage Group are approved SBL Seller/Servicers and we have four others in various stages of approval.  We have already received very positive feedback from these and other lenders in this space, who are especially impressed with our commitment to provide a dedicated platform and team for handling these deals.

We hope you will agree that our new SBL offering benefits all parties involved by attracting private capital; providing liquidity, stability and affordability to the market; bringing consistency, transparency and standardization; and providing a low-risk, economically viable execution that complements our existing offerings. We realize, however, that we may need to make future enhancements in order to continue to meet market needs.

If you have any questions about our Small Balance Loan (SBL) offering, please reach out to me or any one of my SBL team members. We are very excited about this new offering and welcome your continued feedback to let us know if we are indeed meeting your expectations.

For more details on our SBL offering including loan parameters and Seller/Servicer eligibility, please see our recent press release, SBL term sheet, and Customer News article.

*Nashwa Moussa left her position at Freddie Mac in April 2015. She was senior director of SBL & Structured Transactions, Production & Sales.

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