Freddie Mac Mulls Mezz Lending Plan
- Mar 11, 2010
Dees Stribling, Contributing Editor
McLean, Va.–Freddie Mac is formulating a new program to work with mezzanine lenders to expand the GSE’s multifamily mortgage origination program. According to Freddie Mac spokeswoman Patti Boerger, the details of the program aren’t finalized yet, but probably will be next month.
The overall thrust of the program, however, is well defined. “The mezzanine financing would be provided by a third party and we would work with several mezzanine providers for the program,” Boerger tells MHN. “This would be a mezzanine debt solution for the refinancing of over-leveraged apartment properties.”
Under the program, a select number of lenders will make mezzanine loans on mortgages originated by Freddie Mac, which will then be securitized. According to Nasdaq.com, the GSE will originate a lower-leverage senior mortgage and then work with a mezzanine lender to provide additional leverage, up to 85 percent.
The lenders will also acquire b-pieces, the riskiest and most difficult tranche to sell, from new Freddie Mac securitizations. The program would thus be something of an exercise in reciprocity: the mezzanine lenders help Freddie Mac get its securitizations done, while the lenders get to do mezzanine lending.
How much the program will help distressed multifamily borrowers–especially those facing refinancing deadlines on loans made at the peak of the mid-2000s bubble–remains to be seen. The current (as of January) multifamily delinquency rate for Freddie Mac is 0.15 percent.