Our Securitization Program
Our securitization program encompasses the majority of our suite of products and the vast majority of loans that we purchase, with over 90% of our loans in 2012 funded for securitization.
Our Loan Securities Approach
Having access to investors provides Freddie Mac Multifamily with access to highly competitive funding sources that translate to more competitive funding than most portfolio lenders can provide.
Wide array of products at highly competitive rates
Through our securitization program, we offer a wide array of products to meet the acquisition and refinance needs of borrowers including our fixed-rate, adjustable, and supplemental mortgages, as well as specialty products for Student Housing, Seniors Housing, and Conventional Structured Products.
Excellent service throughout the life of a loan
During origination and after our purchase of a loan, we strive to provide excellent customer service for Sellers and borrowers, by:
- Making sure our people, processes and relationships exceed expectations
- Providing specialized knowledge of borrower pre-and post-securitization needs
- Staying continually engaged and attentive to borrower financing needs
- Supporting Seller/Servicers and borrowers with unique regional market experience
- Ensuring that Freddie Mac continues to be the Multifamily investor of choice
- Providing responsive service and keeping servicers and borrowers informed of our decision making process
- Monitoring the performance of the Master and Special Servicers to ensure that borrowers receive the same superior level of service after securitization
Making it easy to do business with us
Our Multifamily teams are focused on a holistic customer service experience that allows you to do business with us easily and efficiently.
Why Does Freddie Mac Securitize Loans?
We built our Multifamily loan securitization program to retain much of the flexibility and streamlined process that our background in portfolio lending helped us to develop.
Providing market liquidity
- To provide liquidity in the mortgage market
- Continued lending ability with reduced capital allocation
- Attract and leverage private capital for borrowers
Reducing impact of default risk
- To reduce risk for the Multifamily line of business and address market needs
- Ability to sell the default risk to private investors
- Decreases portfolio dependency by 90%
How Does Loan Securitization work?
Aggregating individual loans into a pool
- Individual loans are originated and aggregated into a large pool, usually in sizes of $1 B or greater
- Pooling reduces risk through diversification of:
- Property type
- Loan size and type
- Large pools are attractive to investors, and enable greater customization of risk tranches
Aggregated loans are put into a trust
- Aggregated loans are sold to the bond issuer/depositor
- Trust issues bonds to be sold to investors
- Bonds have an ownership interest in trust
- Investors buy bonds from the trust and pay the bond issuer
Servicer responsibilities and securitization documents
- Servicers assume responsibility for servicing and economic decisions
- Actions and decisions are controlled by securitization documents and applicable loan documents
Our Securitization Program Guidelines
Property and borrower requirements
Loan terms and types
- 5-, 7-, and 10-year loan terms with a maximum amortization of 30 years
- May contain initial interest-only periods per underwriting guidelines
- Mortgages are fixed rate or floating rate
- Shorter or longer loan terms, markets of concern, and specialty product types typically require adjustments
- Most loans require a refinance test (some exceptions for low leverage transactions)
Loan-to-value (LTV) ratio requirements
- Maximum loan-to-value (LTV) of 80%, minimum DSCR of 1.25x (acquisition loans or refinanced loans with no cash out to the borrower)
- Maximum LTV of 75%, minimum DSCR of 1.30x (refinanced loans with cash out to the borrower). Exceptions may be granted
Guarantor and re-underwriting requirements
- A non-recourse carve-out guarantor is generally required
- Re-underwriting required based on current property performance and financials and Freddie Mac’s credit policy