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Cerberus reportedly shuttering FirstKey small balance single-family rental lending program

Bloomberg report cites high infrastructure costs as drag on business

FirstKey Mortgage, a subsidiary of FirstKey Holdings, which is indirectly majority-owned by funds managed by Cerberus Capital Management, will reportedly be ending a lending program designed to serve smaller investors interested in buying single-family rental properties.

According to a report earlier this week from Bloomberg’s Heather Perlberg, FirstKey is shuttering its Express program, which was initially launched in December 2013.

FirstKey announced an expansion of the program late in 2014, adding the option of a 30-year fixed-rate term with no pre-payment penalty to portfolio owners seeking loans up to $5 million, with no restriction on the number of properties financed.

Through its Express program, FirstKey offered investors multiple lending options for single-family rental properties, including:

Express Single Property Loans: Individual loans of $75,000 to $1 million per property, depending on the number of units. These 30-year, fully amortizing, fixed rate loans have no prepayment penalties.

Express Portfolio Loans: Fixed rate loans of $150,000 to $5 million on portfolios of five or more properties with two options: 5 or 10-year balloon loans, and 30-year, fully amortizing loans with no payment penalties.

But now, FirstKey plans to eliminate those programs, reportedly due to high infrastructure costs dragging on the business.

From Bloomberg’s report:

The investment firm will no longer lend to small landlords through its FirstKey Holdings unit, and more than 30 people in the company are being fired, according to people with knowledge of the matter. The volume of loans being made wasn’t large enough to justify the infrastructure costs, said the people, who asked not to be identified because the actions are private.

According to a related note published Thursday by Kroll Bond Rating Agency, FirstKey plans to continue operating “Premier” lending program, which originates larger balance loans.

Kroll’s note referenced FirstKey’s 2015 multi-borrower single-family rental securitization, which was its first such offering, and any potential impact the elimination of the Express program may have on the deal.

Kroll stated that none of the loans in FirstKey Lending 2015-SFR1 came from the Express program; therefore there will be no impact on the deal.

HousingWire made multiple attempts to contact FirstKey in an effort to confirm Bloomberg’s article, but repeatedly received no response.

This article will be updated where appropriate.

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