Freddie Mac Launches National Small Balance Loan Platform
Damian Ghigliotty Oct. 9, 2014, 2:52 p.m.
‘Tis the season for small balance loan services.
Freddie Mac today announced the launch of a new platform to purchase and securitize small multifamily loans between $1 million and $5 million on properties with at least five apartment units in an effort to further support affordable housing preservation and development.
The news comes on the heels of a new small balance floating-rate loan offering from the CMBS shop CCRE, which Mortgage Observer first reported last week.
About 29 percent of the multifamily debt market is made up of smaller loans with an average size of $1.2 million, according to 2012 data from Trepp cited by the McLean, Va.-based government-sponsored enterprise.
“We believe our initiative will increase liquidity in the small multifamily loan space and provide stability and facilitate private capital investment in this somewhat fragmented and underserved market segment,” said Freddie Mac Multifamily Executive Vice President David Brickman in a written statement.
“Historically, local lenders have financed small multifamily properties, and debt capital is not widely available across the country from national lenders with standard products,” he said. “We anticipate the average loan to be about $2.5 million and hope to grow our volume in the market segment every year.”
The first three lenders approved to sell the loans to Freddie Mac are Arbor Commercial Mortgage, Greystone Servicing Corporation and Hunt Mortgage Group.
According to Arbor, the program will additionally offer several market-leading terms and components, including full-term interest-only options, non-recourse provisions, low interest rates and 80 percent loan-to-value ratios.
“We are extremely pleased to partner with Freddie Mac on this new, national product offering,” said Ivan Kaufman, Arbor’s chairman and chief executive officer, in a separate release. “Through our experience and success in the multifamily small balance loan business, we have a comprehensive understanding of the level of expertise needed to execute this product and recognize the importance of properly serving this growing market.”