FREDDIE MAC IS WORKING ON a single-loan securitized product for a rollout later this year, an outgrowth of its Capital Markets Execution (CME) program.
The CME program—which bundles loans into a pool that is sold as securities—works like a traditional conduit execution. But this single-financing program would be similar to Fannie Mae's Mortgage Backed Securities (MBS), which sells one individual loan as securities.
“We're close. I'd optimistically say that we're looking at having something in 2009,” says David Brickman, vice president of multifamily CMBS/capital markets for the McLean, Va.-based company. “We intend to come through with single-financing pass-through securities, and we'll be moving in that direction in the near term.”
Freddie's program won't exactly mirror the MBS product, however. Freddie Mac would set a threshold on the loan size of the product, and that figure will be a pretty substantial number. The first adopters of Freddie's new program would likely be the largest deals by the largest borrowers. Fannie Mae's MBS product, on the other hand, is available for loans of more than $5 million. “If we did a $300 million financing with a large REIT, say, it could be multiple loans or one loan that's cross-collateralized—that might lend itself to a pass-through securitization,” Brickman says.
For borrowers, the advantage in the as-yet-unnamed product would be a more customizable loan structure, though the best pricing would be found in the conventional CME execution, the company says.
Freddie Mac is also mulling a seniors housing securitized loan, which may lead to seniors housing-only pools. And the firm continues to work on securitizing its targeted affordable housing and manufactured housing loans. Additionally, Freddie Mac is considering introducing a securitized floating-rate product, though Brickman said that was further down the line.
Freddie Mac lenders applaud the move to a single-loan CME product as further evidence of the company's creativity.
“That would give them the best of both worlds, to have a single transaction execution and a pool,” says Trent Brooks, a managing director at Boston-based CWCapital. “If you're not going to grow your portfolio, you're going to find alternative executions, which Freddie has proven to be very good at.”