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Perspectives
February 27, 2018

The More Things Change, the More They Stay the Same

John Cannon
By
John Cannon, SVP Multifamily Production and Sales

2017 was another amazing year for Freddie Mac Multifamily.

For the third consecutive year, we led the nation as the top multifamily financier, thanks to our exceptional lenders, servicers, investors and borrowers.

Last year, we financed a record-setting $73.2 billion in loan purchase and guarantee volume – growing approximately 30 percent from the year before. We funded more rental housing units than ever – 820,000 – including more than 680,000 units affordable to low- and moderate-income families earning no more than 100 percent of the area median income.

The highlights from 2017 are varied and diverse. We set records across many of Freddie Mac's product offerings and programs. We expanded our Small Balance Loan (SBL) Business – which primarily finances properties with between five and 50 units – by about 76 percent. These units are more likely to provide housing for working families –such as nurses, police officers and firefighters. In fact, through our SBL program, we financed more than 100,000 units of affordable and workforce housing across the country.

In the midst of the current affordable housing crisis, our Targeted Affordable Housing Program grew by more than 50 percent. This program, which provides financing for properties where some or all the units have rent restrictions or receive government subsidies – delivered $8.6 billion to affordable housing projects across the nation. As part of this program, we grew our preservation of affordable rental housing – by 70 percent over last year.

We also expanded the volume of our “green” lending by about 500 percent. Our Green Advantage® suite of products finance energy- and water-saving improvements that help lower operating costs for buildings, keep utility costs low and protect the environment. In 2017, we financed $19 billion in these environmentally friendly improvements.

Further, we grew our product offerings significantly in 2017. Over the past 12 months, we have announced several new offerings designed to serve the needs of all borrowers. We announced our re-entry in the Low-Income Housing Tax Credit market, a new Social Impact Financing vehicle, and products to expedite processing for smaller loans on both the conventional and affordable platforms. These offerings, along with other innovations such as our value-add, moderate rehab and workforce housing forward commitment products, help us to serve every corner of the multifamily market – and to do so with speed, efficiency and certainty of execution.

At the same time, we have used our innovative securities to transfer significant first–loss risk away from taxpayers – and to private investors. In fact, last year alone, we issued $68 billion in securities – taking a large majority of loan risk off our balance sheet. We continued to build on the success of our flagship K- and SB-Deals with new securitization and risk-transfer vehicles that helped us adapt to changing investor demands, lowered the cost of capital for properties and, as a result, made renting more affordable.

Looking at these numbers, products and programs, some would say we’ve come a long way over the last several years. In 2010, for example, we had about half the staff and a quarter of the regional offices we have today. We offered only four loan products. And we financed $14.7 billion in purchase volume. Moreover, we had one securitization offering and issued $6.4 billion in securities. That’s quite a difference.

But as the old saying goes, the more things change, the more they stay the same. Even as we’ve grown tremendously, some important aspects of our business have been remarkably consistent.

For example, our delinquency rate continues to remain virtually zero – at .02 percent. The metrics on our securities – in particular, the loan-to-value ratio on many of the properties we securitize – has stayed remarkably consistent at around 70 percent. And we are as committed to innovation, technology and improving the customer experience as we ever have been – with a host of new products, executions and securities planned for 2018.

Most importantly, our culture, mission and dedication to hard work and superior customer service remain unchanged. We’re still deeply committed to our community mission of providing affordable rental housing to those who need it most. We remain profoundly appreciative of the customers – our lenders, borrowers, servicers and investors – who share our commitment to these ideals and have propelled us to great accomplishment. And we continue to value the talent and dedication of our employees – with a deep understanding that they remain the true driver of our success.

In 2017, we saw a Freddie Mac Multifamily innovating and evolving to meet the needs of a new multifamily market. In 2018, we expect to take that innovation the next level. But make no mistake: deeply embedded in those changes are the very principles and beliefs that drove us to success in the first place.

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