Freddie Mac closed about $15 billion in multifamily loans last year, split between $13.3 billion in conventional business and about $1.7 billion in affordable and structured transactions, based on preliminary figures.

About 73 percent of that volume, or $11 billion, was closed in the last six months of the year, and in December alone, the company processed more than $3 billion in volume. Freddie Mac thought it would close even more loans in December, but the dramatically rising yield on the 10-year Treasury scuttled some deals that were in process.

Since early November, the all-in rate on a 10-year Freddie Mac loan has climbed about 100 basis points, which has impacted many acquisition and refinancing deals. “There are definitely a lot of deals going to the sidelines,” says Mike McRoberts, vice president of multifamily production and sales for the McLean, Va.-based firm. “We view about half of our current pipeline as vulnerable.”

As a result, many borrowers are looking to shorter-term alternatives, and following the yield curve down to capture a lower rate. While 10-year deals are now pricing in the 5.5 percent range, seven-year loans can still be had for sub-5 percent.

But the rising rates may also drive more business to the company’s mezzanine financing arrangement. Freddie Mac recently closed the first loan through that program, which it rolled out last March. The loan, for the 397-unit Metro Place in Camp Springs, Md., consisted of a $47 million first mortgage combined with a $6.75 million mezz loan through Berkshire Properties that brought the total loan-to-value ratio up beyond 80 percent.

While the mezz program’s pipeline is currently light, Freddie Mac expects to see more demand in 2011. “When we rolled the program out in the mid-part of last year, rates just continued to go down, which generated more proceeds on a first mortgage basis. That stole a lot of the business,” McRoberts says. “But we’re looking for that to turn around now with rates starting to pop back up.”

In general, Freddie Mac is optimistic that it will build on 2010, and forecasts a 10 percent to 20 percent rise in multifamily volume this year. In fact, Freddie Mac recently made some borrower-friendly changes to its refi test—an underwriting tool for sizing loans—that it will roll out to its lenders in the first quarter. “We made some adjustments to it which has made it less stringent,” McRoberts says. “It’s less impactful today than it was a few months ago. A lot of deals were right on that cut line, and now a lot of them aren’t.”