Freddie Mac on Monday said next week it expects to offer to the market via a dealer syndicate its first-ever offering of structured pass through certificates backed only by multifamily mortgages with seven-year original terms.
It said it expects to offer about $861 million in certificates, price them during the week of Feb. 21 and settle on or about March 9. The K-701 certificates are the first in Freddie’s “700” series of K certificates and are backed by 44 recently originated multifamily mortgages.
When asked why the government-sponsored enterprise has wanted to and been able to do this type of deal now, David Brickman, vice president of multifamily CMBS capital markets at Freddie Mac, told this publication, “Given the surge in mortgage purchases that we have seen starting from the second half of last year and continuing we believe through this year, it enables us to better segregate our collateral, which we think will give us better execution in the securities markets.”
Seven-year mortgages specifically have had appeal of late because with rates on the rise, there has been increased borrower demand for slightly shorter-term financing as a way to keep borrowing rates relatively stable, he said.
In the future, the government-sponsored enterprise also could potentially offer a deal backed by five-year multifamily loans.
“We’re not there to know that we will absolutely will be able to do one, but if we have enough collateral we will,” Brickman said.
Leading the syndicate and serving as joint bookrunners for the K-107 certificates are Morgan Stanley & Co. Inc. and JPMorgan Securities LLC. Barclays Capital Inc., Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman Sachs & Co, Jefferies & Co. Inc., Wells Fargo Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Inc. are co-managers.
Both Freddie and fellow GSE Fannie Mae have been expanding their multifamily offerings to investors.
