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Freddie Mac — Cap Escrow Adjustment Process Changes webinar (December 2016)

17 slides from Freddie Mac's conference presentation, Dec 12, 2016

1. Slide 1: Cap Escrow Adjustment Process Changes

   Cap Escrow Adjustment Process Changes Steve Power, Freddie Mac Jim Moore, Kensington Capital Advisors December 12, 2016

2. Slide 2: Agenda

   Agenda  Rationale for Change  Benefits of New Process » Overview of Current Process  About Kensington Capital Advisors, LLC (“Kensington” or “KCA”)  Sample Kensington Cap Escrow Adjustment Form  Overview of New Mandatory Process  When will the new process take effect?  Resources Kensington Ca

3. Slide 3: Rationale for Change – We Heard Your Concerns

   Rationale for Change – We Heard Your Concerns  Why are we changing the Cap Escrow Adjustment process? » Feedback from Primary and Master Servicers » Automate and streamline the process through third party vendor, Kensington » Bring consistency and reliability to the process in order to eliminate th

4. Slide 4: Benefits of New Process

   Benefits of New Process  Automation » System generated emails and lists provided by Kensington » Primary Servicer ability to upload data directly to Kensington portal » Less time for all parties to complete Form (saves man hours)  Consistency and timeliness » Adjustments consistent across all serv

5. Slide 5: Benefits of New Process (Cont'd)

   Benefits of New Process (Cont’d)  Eliminates the following: » Errors based on valuations » Master Servicer review and approval » The need to create record in CRT (Consent Request Tracker) – Kensington will provide reports to Freddie Mac  Freddie Mac has contracted with Kensington to provide ALL ca

6. Slide 6: About Kensington Capital Advisors

   About Kensington Capital Advisors » Kensington Capital Advisors LLC is an independent financial advisory firm specializing in the analysis, structuring and execution of derivatives products and structured financing solutions » Kensington is registered under the following: – MSRB (Municipal Securitie

7. Slide 7: About Kensington Capital Advisors (Cont'd)

   About Kensington Capital Advisors (Cont’d) » Kensington prioritizes systems and information security, and its practices comply with regulatory guidance and Freddie Mac contractual obligations » Kensington has data backup and disaster recovery plans in place to ensure the ability to provide client se

8. Slide 8: About Kensington Capital Advisors (Cont'd)

   About Kensington Capital Advisors (Cont’d) » Freddie Mac recently expanded Kensington’s role under its contract to include ALL cap escrow adjustments » The new streamlined cap escrow adjustment process uses Kensington to price the replacement cap and calculate the new monthly cap escrow payment usin

9. Slide 9: Sample Kensington Form

   Sample Kensington Cap Escrow Adjustment Form KCA PS PS PS PS  Primary Servicer (PS) is now only required to complete the sections identified on the sample form above Kensington Cap Escrow © Freddie Mac 9

10. Slide 10: Overview of New Mandatory Process

    Overview of New Mandatory Process » Upon loan closing, Primary Servicer calculates the monthly cap escrow payment based on the purchase price of the rate cap agreement per its usual process » Within 30 days of loan closing, Primary Servicer sends the following to Kensington at capinfo@kensington-adv

11. Slide 11: Overview of New Mandatory Process (Cont'd)

    Overview of New Mandatory Process (Cont’d) » A spreadsheet attached to the email will include the list of loans with both Freddie Mac and Primary Servicer loan numbers and will have open cells to input both: – Anticipated UPB of the loan at the time of cap renewal or anticipated notional amount of t

12. Slide 12: Overview of New Mandatory Process (Cont'd)

    Overview of New Mandatory Process (Cont’d) » Primary Servicer reviews the loan list to verify that the population of loans requiring adjustments is accurate » The email will provide detailed instructions for uploading the spreadsheet to Kensington’s portal, or alternatively, will provide an email ad

13. Slide 13: Overview of New Mandatory Process (Cont'd)

    Overview of New Mandatory Process (Cont’d) » If this is the first cap escrow adjustment for a portfolio, bond or warehouse loan, Primary Servicer submits Kensington Form to Freddie Mac for review and approval – Freddie Mac reviews Kensington Form and returns it to Primary Servicer with its approval

14. Slide 14: Timeline

    Timeline  Beginning immediately: » This is the new mandatory process » Kensington is the only vendor providing ALL cap escrow adjustments going forward » The Kensington Cap Escrow Adjustment Form is available on Freddie Mac’s website (www.freddiemac.com). – Primary Servicers are required to use the

15. Slide 15: Resources

    Resources  Resources to support the new cap escrow adjustment process: » Section 28.18 (bond credit enhancements) and Section 43.22 (cash loans) of Freddie Mac Multifamily Seller/Servicer Guide will be revised to reflect the new process (December 15 is anticipated delivery date) » Kensington Cap Es

16. Slide 16: Contacts

    Contacts  Kensington Capital Advisors LLC » Group Mailbox – capinfo@Kensington-advisors.com; Phone: (704) 644-3681 » Jim Moore – jmoore@Kensington-advisors.com; Phone: (704) 644-3681 x111 » Charlie Jacobs – cjacobs@Kensington-advisors.com; Phone: (704) 644-3681 x113  Freddie Mac Asset Management »

17. Slide 17: Q&A

    Q&A Kensington Cap Escrow © Freddie Mac 17

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