Freddie Mac has started working on a new, “multisite” multifamily loan product, fresh on the heels of the federal REO-to-Rental program rollout.
Since the program is still in its early stages—and subject to conservator approval—many details haven’t been fleshed out. But the product would be the first scattered-site commercial mortgage product that Freddie Mac has ever offered—and would be a boon to a still struggling for-sale market.
“We are working very hard on trying to develop a multifamily mortgage product to serve the needs of large investors in single-family properties,” says David Brickman, senior vice president of multifamily at McLean, Va.–based Freddie Mac. “It would facilitate greater investment in the single-family market and help provide stabilization.”
Such a product would be a game changer. Investor interest in the REO-to-Rental program has been high ever since it was announced Feb. 1 by the Federal Housing Finance Agency (FHFA). But one of the main hurdles for investors is that buying houses in bulk is mainly an all-cash business. To have a loan program on the market tailored to a multisite execution would open up the investor pool, clearing the market of more houses more quickly.
The new loan program would likely be a shorter-term, lower-leverage, floating-rate execution, and only available for deals of $100 million or more, according to an investor already active in this space who requested anonymity. The multisite mortgage would likely target large, cross-collateralized pools owned and managed by a single institution.
Even before the FHFA’s announcement, some investors had been busy scooping up scores of unsold homes and repositioning them as rentals. Last month, Los Angeles–based private equity firm Oaktree Capital Management teamed up with Santa Ana, Calif.–based property manager Carrington Holding Co. in a $450 million joint venture to buy distressed single-family homes and turn them into rentals. Carrington, incidentally, manages more than 3,000 single-family rental homes for Fannie Mae’s Deed-for-Lease and Tenant-in-Place programs.
Also in January, Oakland, Calif.–based Waypoint Real Estate Group, which specializes in buying distressed for-sale assets, received an investment from Menlo Park, Calif.–based GI Partners to buy more than $250 million in for-sale rental homes.
Freddie Mac declined to provide details, and a Fannie Mae spokesperson said, “It’s too early to speculate” on what kind of financing might be available for an REO-to-Rental deal. So, much remains to be seen. Will it be confined to assets being sold by the three government agencies, or will it be available for any single-family portfolio sold by any institution? Will the program be limited to just REO assets, or can it be applied to any bulk single-family-to-rental execution?
And ultimately, will the program see the light of day? One condition of the GSEs’ conservatorship is a prohibition against the creation of any new programs—even when it’s in the public’s interest to do so. A couple of years ago, Freddie Mac wanted to start a manufactured-housing loan program, and a small-loan program, but were told not to by the FHFA, though such programs would be “mission-rich.”