Freddie Mac headquarters
McLEAN, VAFreddie Mac Multifamily has announced that it has securitized more than $100 billion of multifamily mortgages since the program was launched in 2009. That year there was only $2 billion in issuance. Fast forward to 2015: the GSE expects to see some $30 billion in K-Deals by year’s end, the most ever in a year, Mitch Resnick, VP of Capital Markets, tells GlobeSt.com.
The rapid growth of the program is very telling, he adds. Appetite for this paper is huge for several reasons. “I think a lot of it has to do with the consistency with the program.” For example, he says, the structures haven’t changed much. “Consistency can be very boring but boring is good in the fixed-income world.”
At the same time, the K-Deal platform, or product line, has been expanded to appeal to more investors. Over the years it has added five-, seven-, and 10-year term loans, floating-rate loans, single borrower loans, legacy portfolio loans, and seniors, student, military and targeted affordable housing loans.
Another reason for the K-Deals’ popularity, Resnick adds, is that Freddie Mac is able to guarantee a senior part of the capital structure even as it sells mezzanine and subordinate bonds. The combination of these factors has led participants to come back again and again for purchases.
Whatever the reasons for investors’ appetite for K-Deals, it is clear the program has been a success. It is easy to forget there were doubts when Freddie Mac launched the program during the depth of the recession, Executive Vice President David Brickman wrote in a blog post. “In 2008 when we first started talking to investors about doing a CMBS-style securitization, some of them thought we were crazy,” he wrote. “The CMBS market had collapsed due to the financial crisis. We ended up helping to revive the market through our K-Deal issuance. Today we are one of, if not the largest, issuer of commercial mortgage credit in U.S. structured finance.”