Borrowers Start Using Freddie Mac Index Lock Program
- Feb 07, 2014
Last fall, Freddic Mac rolled out its new Index Lock program, and now multifamily borrowers are beginning to take advantage of it. The goal of the program is to mitigate interest rate volatility by allowing borrowers to lock the underlying Treasury at any time during quote or underwriting. According to the GSE, the program also reduces proceeds volatility, with less documentation and faster execution than the standard lock process.
Centerline Capital Group, which provides mortgages for affordable and conventional multifamily housing, said recently that it has become one of the first lenders to execute under the new Index Lock program. The financing involved is a $13.3 million loan for LL Sams Historic Lofts in Waco, Tex.
“In a volatile rate environment, the Index Lock program provides borrower an opportunity to lock in lower Treasury yield early in loan process,” Yogesh Joshi, director with Centerline’s Los Angeles office, tells MHN. “Since the Treasury is the most uncertain component of an interest rate, we expect more borrowers to take advantage of this program to remove the uncertainty.”
The Index Lock structure is available to existing borrowers who have had a Capital Markets Execution loan purchased by Freddie Mac within the last 18 months. The process works this way: when a seller or servicer wants to lock the Treasury Index on behalf of their borrower, they must identify an asset, then do the requisite paperwork. The Treasury Index can then be locked within hours of receipt of the necessary paperwork, without having to submit a preliminary underwriting package.
After the execution of the Index Lock, borrowers have the option to complete the Early Rate-Lock process, which locks the spread quickly (in that case, the preliminary underwriting package should be delivered within 15 days). Or the borrower can choose Standard Delivery, which locks the spread at completion of full underwriting (to be delivered within 45 days).