October 5, 2015
Looking back, September was a truly remarkable month. We reached a major milestone — exceeding more than $1 billion in loan debt purchases in less than a year. We also priced our third securitization.
This is a great demonstration of the commitment and partnership coming from our approved SBL Seller/Servicers and the dedicated team of SBL professionals at Freddie Mac Multifamily.
As we move into October, we’re fine-tuning our efficiency and our alignment and responsiveness to the market. Here’s what you need to know:
- Guidance on Loans Over $5 Million
- Holding Coupons for 45 Days
- Submission of the Executed Application
- Updated Property Inspection and Lease Audit Form
- SBL Guide Addendum Changes
- Loan Document Updates
- Single Counsel Update
- New Market Tiers, Pricing Grids and Pricing Calculator
- Performance Reviews
- SBL Focus at Customer Conference (Oct. 15-16)
Looking for a previous SBL update? Earlier updates are posted as “Offering Update” on the SBL Originate and Underwrite page under References and Tools. Going forward, SBL updates now can be found under Customer News, titled “SBL Monthly Update.”
Guidance on Loans Over $5 Million
Our SBL offering is intended to serve owners of small multifamily properties. While we will consider loans over $5 million on a case-by-case basis, any such loan must be discussed with and approved by a relationship manager prior to loan application. Additional requirements may apply to loans that exceed the $5 million threshold. This guidance is subject to change.
Holding Coupons for 45 Days
We will hold coupons for loans under application for 45 days from the date of the application to the date of the delivery of the full underwriting package/loan submission template (LST) upload. This is a great competitive feature and a great benefit for borrowers. Keep in mind:
- The hold applies regardless of whether the price moves up or down after a borrower signs the application.
- Any loan not delivered in that time frame will be priced based on the SBL pricing grid at the time of delivery.
- Material changes to the deal can result in adjustments to the coupon.
We anticipate the Origination Allowance and the 5-50 SBL Seller Incentive will remain in effect until Jan. 31, 2016. Effective immediately, the payments will be disbursed for each loan as part of the purchase wire. We will provide each SBL Seller with a list of the loans that were eligible for and received the incentive in order to reconcile and confirm payments.
Sellers are still required to provide the Property Condition Assessment (PCA) and appraisal as an exhibit to the loan narrative and to provide Single Counsel’s fees. Sellers should provide the Single Counsel fees as close to loan funding as feasible in order for us to provide the confirmation/reconciliation information as early as possible.
It is important to note that Freddie Mac retains the right to change incentives at any time should there be a strategic need to do so.
New term sheets have been posted on the SBL Originate and Underwrite page.
Submission of the Executed Application
As a reminder, the signed and dated application must be submitted as an exhibit to the full underwriting package delivery/LST upload.
Updated Property Inspection and Lease Audit Form
The new and improved Property Inspection and Lease Audit form for SBL has been posted to the References and Tools section on the SBL Originate and Underwrite page. We enhanced functionality and auto-population; we updated content for SBL program specifics (i.e., top markets, non-certified units, etc.); and we streamlined and condensed content requirements.
SBL Guide Addendum Changes
On Sept. 25, we updated the following Guide Chapters for SBL:
- Summary of Updates to the SBL Addendum
- Chapter 8: Property Fundamentals
- Chapter 9: Borrower Fundamentals
- Chapter 14: Property Condition Report Requirements
- Chapter 16: Seismic Risk Analysis Requirements
- Chapter 18: Originate a Small Balance Loan
- Chapter 31: Insurance Requirements for the Small Balance Loan Purchase Product
- Chapter 41: Transfer of Ownership
- Chapter 43: Specific Servicing Responsibilities
- Chapter 55: Documents and Deliveries
We also updated the SBL Exhibit 2 – Section 1.2: SBL Underwriting Checklist and posted a two new forms:
- SBL Form 1117: SBL Borrower Certification of Physical and Environmental Property Condition
- Commercial Lease Analysis and Estoppel – SBL
Both are located on the References and Tools section on the SBL Originate and Underwrite page.
Loan Document Updates
We’ve revised our loan documents, reducing the overall length while making them easier to read and understand. The changes included:
- All deal-specific terms have been moved to the front of the loan documents and organized in tables, so they are easy to find and review.
- The overall length of the loan documents has been reduced by 45 percent.
- Most rider concepts have been built into the body of the loan agreement as either "check the box" or "if, then..." statements, making them more visible to borrowers before a commitment is issued.
SBL Sellers and Single Counsel will receive the new documents on Oct. 5 with an Oct. 23 deadline for comments. We will highlight the key changes at the Customer Conference on Oct. 15 and 16. The new documents will be posted to the Small Balance Loan Documents page of our website by Oct. 30.
Use of the new forms will be optional for commitments/Early-Rate Lock Applications (ERLAs) with an effective date on or after Oct. 30 and mandatory for commitments/ERLAs with an effective date on or after Nov. 30. Deals closing in November and December will be a mix of old and new SBL loan documents. Once we reach January, everything should be closing on new SBL loan documents, except a handful of early rate-locked deals.
Single Counsel Update
In response to the continued growth of the SBL pipeline, we have added another approved SBL Single Counsel law firm – Bryan Cave. This brings our total number of Single Counsel law firms up to twelve. You will receive the updated Single Counsel contact list from our Legal team.
New Market Tiers, Pricing Grids and Pricing Calculator
On Aug. 13, 2015, we hosted a webinar on the new Market Tiers and Credit Alignment that took effect Sep. 1, 2015. If you missed it, download the presentation here.
The new market tiers (Top, Standard, Small and Very Small) represent better alignment to credit needs in those markets. Also, we have updated the pricing grid to include Top and Standard Markets, and Small and Very Small Markets. Additionally, we now post an updated Pricing Calculator.
The grid and calculator are posted weekly on the SBL Originate and Underwrite page.
Beginning in late October, we will be providing each of our SBL Seller/Servicers with a performance assessment. Meetings will be scheduled to discuss and finalize the assessment and to set performance measures for 2016.
SBL Focus at Customer Conference (Oct. 15-16)
SBL is front and center at this year’s Multifamily Customer Conference in Chicago, Oct. 15-16, with two SBL breakout sessions and the first meeting of our new SBL Seller/Servicer Advisory Committee, which includes representatives from each of our SBL approved Seller/Servicers. One breakout session is for SBL Seller/Servicers only and will include updates on offering enhancements and a Q&A session with the Freddie Mac SBL staff.
We strongly encourage you to attend. Register now.