Freddie Mac has announced a new program through which it will allow mezzanine or secondary loans on the first mortgage apartment loans it purchases. This program will allow apartment owners to refinance loans that have declined in value by up to 90% of the new value.
The program “is aimed at recapitalizing multifamily properties and easing the painful process of deleveraging,” Freddie Mac officials say. This is not an easing of credit per se and “is not intended to increase leverage at the property level or fuel excessive risk taking by investors.”
“The intent is to help the industry reduce the number of properties that may otherwise become defaults, timely workouts or foreclosures if they don’t get much-needed financing,” says Mike May, Freddie Mac senior vice president of multifamily. “We are working with mezzanine providers who are experienced multifamily owners, operators, or investors to help fill the capital gap due to reduced property valuation compared to existing financing.”
The senior or first mortgage loan will be up to 75% loan to value with the mezzanine loan being up to an additional 15% loan to value.
According to Freddie Mac, loans must meet the following criteria:
— Loans refinanced from either Freddie Mac or non-Freddie Mac portfolio
— Take-out of existing construction loan financing
— Acquisitions
— Properties/assets in good physical condition and experienced sponsors
— Stabilized Class A and B conventional multifamily properties
— Capital Markets Execution loans (loans intended for Freddie Mac K Certificate multifamily mortgage-backed securities), portfolio executions and structured transactions
Visit the Freddie Mac website here for more information.
(Brian Andrews is a certified mortgage banker specializing in the financing of commercial real estate. His business is Andrews Commercial Mortgage and he can be reached at brian.andrews@acmla.com.)
