Those looking to hit the sweet spot to strike an agency deal on an affordable housing property are seizing the day.
In the wake of a record-breaking year and an announcement to reduce their role in the marketplace, Freddie Mac is focusing on fishing out more affordable multifamily business, industry officials said.
The company is growing more aggressive, adjusting its pricing and underwriting, to hit its affordable housing goals by year end, according to agency lenders.
In July, Freddie Mac rolled out a new test tool online to help sellers identify affordable opportunities in the marketplace, according to the agency website.
The Microsoft Excel spreadsheet crunches the numbers on a property to see if it may qualify for financing and helps define possible loan outcomes before getting to the underwriting process. The agency also provided two training sessions, in which about 300 people participated in, to help users understand the tool and how it works, officials said.
Vic Clark, managing director at Centerline Capital Group, said the push to score more affordable deals may bring move the agency into more of the B- and C+ property spaces.
“The A properties are always a war to win because it’s so competitive,” he says. “With some of the nicer B properties, I think they can qualify for this affordable incentive. There’s more demand for that product out there. There are more borrowers looking for that more than anything and that’s where there’s opportunity in the market.”
Centerline recently closed with Freddie Mac on an affordable housing renovation deal in Harlem, N.Y.
The 412-unit deal, which was spread between two properties, focused on refinancing existing debt for the properties in the Harlem and Northern Manhattan areas, which are seeing more movement as people choose them over prime areas such as DUMBO and Willamsburg, which are surpassing Manhattan rents.
In total, the two-property deal locked in at $91.9 million in fixed rate financing over 10 years with a 30-year amortization and includes 20 years of inclusion in the Section 8 housing program.
Adjusting Pricing, Underwriting, to Win More Deals
The recent movement on Freddie Mac’s end has made the agency the go-to vehicle for affordable financing, Citi Community Capital managing director Mark Dean noted.
With the aggressive goals to meet before the end of the year, Freddie Mac officials are trying to meet the numbers by getting deals that fit all the while still reducing their volume by the mandated 10 percent, Dean says.
“Freddie has basically taken the position that those goals are very important to them and they’re going to adjust the pricing, and to a degree some of the underwriting, to assure they reach those goals,” he says.
But Freddie Mac isn’t always the best option, Dean added. Sometimes Fannie Mae is what works best for the deal on the table and comparing rates from now to a year ago isn’t what counts, it’s pitting them against one another in this market is what counts. One agency may work better for one deal while the other might favor a different deal. The online spreadsheet is one of the ways Freddie Mac's officials are trying to define what they're looking for.
However, developers shouldn't be dragging their feet in today's ever-changing market. While interest rates have spiked up over the last three months, they are still at historic lows.
“I’ve got to take advantage of this opportunity today because it may not be here tomorrow,” Dean says.