Consolidation of Our Loan Documents Helps to Greatly Streamline Originations
January 30, 2014
We’re announcing a major change to our loan documents that will streamline our loan processing and documentation. Today, we’ve posted a new single set of consolidated loan documents that will be used for both our securitization execution and our portfolio execution loans, eliminating our prior approach of maintaining two distinct sets of loan documents. Making this change will eliminate 84 separate loan documents, representing over 600 pages of content. With the vast majority of our loans today being purchased for securitization, this approach will greatly streamline the loan document process for you and your borrowers.
- Loan Agreements – We are reducing the number of Loan Agreements from four to two. The standard Loan Agreement will cover all types of Conventional Program Mortgage offerings, except Seniors Housing. There will be a parallel Loan Agreement for all types of Seniors Housing Mortgages. With the exception of bond credit enhancements, Target Affordable Housing (TAH) offerings will use the standard Loan Agreement. Structured Transactions with a Revolving Credit Facility will also use the standard Loan Agreement, but will include specific modifications in the form of a rider.
- Notes – We are reducing the number of Notes from ten to six. The following six Notes will be used to document virtually all Freddie Mac Mortgages:
- Demand Promissory Note (9-10-2013)
- Florida Amended and Restated Multifamily Note (3-1-2014)
- Maryland Amended and Restated Multifamily Note (3-1-2014)
- Multifamily Note - Adjustable Rate (3-1-2014)
- Multifamily Note - Fixed Rate - Defeasance (3-1-2014)
- Multifamily Note - Fixed Rate - Yield Maintenance Only (3-1-2014)
- Forms – The merging of the Loan Agreements reduces the overall number of forms. Specially, we are eliminating:
- 65 Riders overall
- 30 Seniors Housing Riders
- 18 core documents
- Riders – The remaining Riders have been revised to ensure consistency between different Riders of the same type. For example, key provisions in the seven remaining transfer riders are phrased and presented in the same way in all of these Riders. We’ve applied the same approach to the remaining Riders.
Transitioning to the New Loan Documents
The new loan documents are now available on our Multifamily Loan Execution Documents webpage for your review. At this time, you and your counsel can begin downloading the documents to your systems, review the documents, and circulate them to borrowers with deals scheduled to commit in March or later.
These new loan documents are only to be used for loans documented on Commitments or Applications generated on or after March 3, 2014. We will also publish a Multifamily Seller/Servicer Guide Bulletin March 3, which will address their use and requirements. The current versions of all loan documents are still available online on the Loan Documents page.
As we prepare to eliminate the use of separate loan documents by execution path, we’re also changing our branding approach to simplify the naming of our executions. We’re eliminating the use of the name Capital Markets ExecutionSM (CME) for loans purchased for securitization. We will continue to provide additional information on this process as we undertake the various aspects of the rebranding.
Improving Customer Experience
The alignment and merger of our loan documentation will give Sellers consistency in language used in various Riders and loan documents. It will also reduce the number of documents you must maintain to document a loan. The result should provide you and your borrower a more efficient experience.
Increased consistency should also generate efficiencies for Servicers. With clearly aligned terms, tracking and monitoring should be easier post-funding.
Please contact your Freddie Mac representative with any questions about the loan documents.