Freddie Mac offers extra housing liquidity to small lenders

by Candyd Mendoza10 May 2019

Freddie Mac has announced a new effort that provides small financial institutions with additional liquidity to finance affordable housing.

The GSE’s new Private Placement PC Swap execution (PPP) security allows lenders with less than $10 billion in assets to exchange a pool of loans backed by affordable properties with Freddie Mac Multifamily PCs-backed loans. The Multi PCs, which is a variant of Freddie Mac’s 55-day Multifamily PC Swap, can be sold to investors – bringing back liquidity to the financial institution.

“The Private Placement PC Swap allows small financial institutions to access additional liquidity,” said Robert Koontz, senior vice president of Freddie Mac Multifamily Capital Markets. “These affordable-housing lenders generally lack the scale to access capital markets in a cost-effective manner. By swapping Freddie Mac PCs through a low-cost execution, we can provide more liquidity for affordable housing. It’s right in line with our mission.”

Freddie Mac carried out the first execution of the new structure with San Francisco-based IMPACT Community Capital, an investment manager focusing on underserved communities. IMPACT swapped 77 loans, adding up to approximately $141 million, for Freddie Mac guaranteed Multi PCs.

IMPACT financed all the properties involved in the transaction through 9% low-income housing tax credits. The 3,400 units financed were affordable to low-income residents earning 50% or less of area median income.

“Freddie Mac’s execution with IMPACT Community Capital is a unique way to provide more efficient access to capital for the affordable housing space,” said David Leopold, vice president of targeted affordable sales and investments at Freddie Mac. “This transaction will not only help thousands of residents in the 77 properties financed, but also ensures that IMPACT has the additional funding it needs to make even more mission-driven investments. Freddie Mac is pioneering efforts to encourage investment in underserved markets, and this is yet another example.”

“IMPACT is excited to be one of the first to partner with Freddie Mac on the Private Placement PC Swap execution,” said IMPACT Chief Investment Officer Michael Lohmeier. “It allows us greater flexibility to raise funding from new investors in support of our mission to provide positive impact in underserved communities. The transaction continues a long history of innovation between IMPACT and Freddie Mac that included partnering on the first two Q-Series transactions in 2014 and 2015.”