Tax-Exempt Bond Securitization (TEBS)
Offers the efficiencies of our Capital Markets ExecutionSM to tax-exempt bond holders in the multifamily affordable housing market
|Tax-Exempt Bond Securitization (TEBS)|
|Product Description||The TEBS structure is a proprietary execution offered by Freddie Mac through which a Sponsor transfers privately placed tax-exempt multifamily housing revenue bonds and related taxable bonds or mortgages to Freddie Mac in exchange for
|Benefits to Sponsor||
|Minimum Pool Size||Generally $100 million|
|Subordination Level (Size of B Piece)||On average 15% of total pool size, but can be customized based on collateral quality and Sponsor needs|
|Eligible Sponsors||Freddie Mac Program Plus® Seller/Servicers with demonstrated expertise in bond transactions and Targeted Affordable Housing Seller/Servicers; other well-capitalized financial institutions on a case-by-case basis|
|Eligible Properties||Multifamily properties; all assets will be underwritten by Freddie Mac|
|Minimum Debt Coverage Ratio/Maximum Loan-To-Value Ratio (of each asset)||1.05x / 95% per Freddie Mac underwriting|
|Documentation/Due Diligence Required During Freddie Mac Underwriting
(Complete list of documentation available in TEBS Underwriting Checklist, provided upon request)
(Approximately 50 bps for a $100 million transaction)
(Based on underlying collateral and subordination level)
|Liquidity Facility Options||In the event that the senior certificates bear interest at a variable rate, Freddie Mac may also provide a liquidity facility; several options exist, depending upon the preference of Sponsor|
|Hedging||If the Class A Certificates are variable-rate certificates, the Sponsor must purchase an interest rate hedge from an approved Freddie Mac counterparty|
How TEBS Works
- Sponsor delivers bonds to Freddie Mac, which are registered in the name of Freddie Mac.
- Freddie Mac delivers rated Class A and unrated Class B Certificates to the Sponsor.
- Class A Certificates are marketed and sold to investors; Freddie Mac guarantees the payment of scheduled principal on the bonds and all interest on the Class A Certificates.
- Class B Certificates are issued to Sponsor but pledged back to Freddie Mac as collateral for Sponsor’s obligation to reimburse Freddie Mac for any credit or liquidity guarantee payments; monthly interest payments on the Class B Certificates are made on a subordinate “if available” basis only after all Class A Certificate interest and pool expenses have been paid in full.
- Download the Tax Exempt Bond Securitization (TEBS) term sheet.
The information provided here is not a replacement or substitute for information found in the Multifamily Seller/Servicer Guide. Terms set forth herein are subject to change without notice.