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Freddie Mac unveils new security to provide affordable housing liquidity for small lenders

To help financial institutions with less than $10 billion in assets access additional liquidity

Freddie Mac is launching a new security to help smaller lenders access additional liquidity for affordable housing financing.

The government-sponsored enterprise announced its new Private Placement PC Swap – or PPP – on Wednesday to help financial institutions with less than $10 billion in assets access additional liquidity for financing affordable housing.

Freddie Mac explained that PPP will enable a lender to swap a pool of loans backed by affordable properties for Freddie Mac Multifamily PCs backed by the loans.

“The Multi PCs, which are guaranteed by Freddie Mac, can then be sold to investors, returning liquidity to the financial institution,” Freddie explained in a press release, adding that this new structure is a variant of its 55-Day Multifamily PC Swap.

“The Private Placement PC Swap allows small financial institutions to access additional liquidity,” said Robert Koontz, senior vice president of Freddie Mac Multifamily Capital Markets. “These affordable housing lenders generally lack the scale to access capital markets in a cost-effective manner. By swapping Freddie Mac PCs through a low-cost execution, we can provide more liquidity for affordable housing. It’s right in line with our mission.”

Freddie Mac also revealed its first execution using the new structure with IMPACT Community Capital, a San Francisco-based impact investment manager investing in underserved communities. According to Freddie Mac, IMPACT swapped 77 loans, totaling nearly $141 million, for Freddie Mac guaranteed Multi PCs.

The properties involved in the transaction received financing through 9% Low-Income Housing Tax Credits, and approximately 3,400 of the units financed are affordable to low-income residents, earning 50% or less of area median income, according to Freddie Mac’s release. IMPACT is now able to sell the Multi PCs to investors to acquire additional liquidity for future affordable housing investments.

“Freddie Mac’s execution with IMPACT Community Capital is a unique way to provide more efficient access to capital for the affordable housing space,” said David Leopold, vice president of Targeted Affordable Sales & Investments at Freddie Mac. “This transaction will not only help thousands of residents in the 77 properties financed, but also ensures that IMPACT has the additional funding it needs to make even more mission-driven investments. Freddie Mac is pioneering efforts to encourage investment in underserved markets, and this is yet another example.”

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