Freddie Mac · OTC:FMCC
Freddie Mac — Debt Investor Presentation (September 2021)
33 slides from Freddie Mac's debt investor presentation, Sep 30, 2021
Slide 1: Tax-Exempt Loan Program Overview (ML-Deal)
Tax-Exempt Loan Program Overview (ML-Deal®) Investor Presentation as of September 30, 2021 ML-Deal Overview © Freddie Mac Multifamily
Slide 2: Table of Contents
Table of Contents ML-Deals® Business Introduction…………………………………….................……………..……………..3 Production, Sales and Underwriting…………….………........…….…............……………..…………….. 6 ML-Deals Securitization and Structure….…………………...………………..……………..…………….. 11 Community Reinvestment Act and Impact Bonds….
Slide 3: ML-Deals Business Introduction
ML-Deals® Business Introduction 3
Slide 4: ML Certificate Overview
ML Certificate Overview Freddie Mac’s Freddie Mac’s Targeted Affordable Housing (TAH) program includes loans for core mission is financing multifamily properties in underserved areas that are affordable to to provide families with low and very low incomes, including cash loans, bond credit liquidity
Slide 5: ML Certificate Overview (continued)
ML Certificate Overview (continued) The TEL Since the financial crisis in 2008, many banks have developed TEL securitization versions of their tax-exempt bond private placement structures to obtain program is a “lending credit” as compared with “investing credit” for Community Reinvestment Act (CRA)
Slide 6: Production, Sales and Underwriting
Production, Sales and Underwriting 6
Slide 7: Financing Affordable Units
Financing Affordable Units 89% of the eligible units that we financed in Q1-Q3 2021 were affordable to households earning at or below 100% of the area median income Multifamily Funded Units by Area Median Income (AMI) 2014 - September 30, 2021 4% 6% 6% 7% 6% 5% 4% 9% 6% 7% 7% 6% 8% 8% 8% 9% 16% 14%
Slide 8: Sourcing TEL Business
Sourcing TEL Business Freddie Mac buys loans from a network of Optigo TAH lenders that have substantial lending experience and established performance records ▪ The small size of the network promotes quality ▪ Our Optigo TAH lenders must comply with Freddie originations and servicing of multifamily
Slide 9: ML-Deal Mortgage Guidelines
ML-Deal® Mortgage Guidelines The following are the general guidelines for Freddie Mac’s Multifamily mortgage purchases that are intended for the ML securitization program (subject to certain exceptions): ▪ Multifamily loans secured by affordable housing properties, Visit our website including new co
Slide 10: ML-Deal Mortgage Guidelines (continued)
ML-Deal Mortgage Guidelines (continued) ▪ Effective gross income is calculated based on trailing three months' actual rent collections or the annualized current rent roll minus a vacancy rate between 3%-5% depending on historical vacancy, subject to regulatory agreement rent restrictions ▪ For TELs
Slide 11: ML-Deals Securitization and Structure
ML-Deals Securitization and Structure 11
Slide 12: Multifamily Securitization Program – Strengths
Multifamily Securitization Program – Strengths About 98% of YTD 2021 STRONG CREDIT provided by credit SERVICING PERFORMANCE on all Freddie Mac support of underlying mortgages securitization platforms (K, ML, SB) Multifamily underwritten to Freddie Mac’s portfolio through security assets with some of
Slide 13: ML Securitization Program
ML Securitization Program In June 2017, Pursuant to the Tax-Exempt Loan Securitization Program guidelines, TELs and the related Taxable Loans, as applicable, are secured by affordable Freddie Mac housing properties that qualify for the receipt of LIHTCs and are subject to priced and closed rent and/
Slide 14: ML Investment Opportunity
ML Investment Opportunity Opportunity to invest in predominantly tax-exempt securities supported by pools of TELs secured by affordable housing properties, including new-construction and post- construction properties after moderate or major rehabilitation ML Guaranteed Certificates are expected to b
Slide 15: TEL Structure
TEL Structure Freddie Mac TEL Structure for Targeted Affordable Housing Project loan pledged Freddie Mac TEL Project loan as TEL collateral purchases the TEL Optigo TAH lenders make The governmental lenders use The governmental lenders The Optigo TAH lender sells funding loans, also known as the pro
Slide 16: Overview of ML-Deal Process
Overview of ML-Deal Process ▪ The fixed- or floating-rate TELs are transferred by Freddie Mac into a trust and treated as a partnership for federal income tax purposes¹ ▪ The fixed- or floating-rate Taxable Loans, if applicable, are transferred by Freddie Mac into a taxable loan trust and treated as
Slide 17: ML, M and K Certificates – Issuance and Market Comparison
ML, M and K Certificates® – Issuance and Market Comparison ML Certificates M Certificates K Certificates Tax-exempt, taxable if Tax Status Tax-exempt, AMT, taxable Taxable applicable Credit Enhancement Freddie Mac Guarantee Freddie Mac Guarantee Freddie Mac Guarantee Affordable multifamily loan Affo
Slide 18: Basic ML-Deal Transaction Structure
Basic ML-Deal Transaction Structure Freddie Mac securitizes fixed-rate and floating-rate TELs via the ML-Deal program through the following steps: ▪ Freddie Mac deposits the fixed- and/or floating-rate TELs into a trust ▪ Trust issues fixed- or floating-rate Freddie Mac Guaranteed and Non-Guaranteed
Slide 19: Sample ML Trust Structure
Sample ML Trust Structure1 Guaranteed Classes Trust Structure1 ▪ One principal and interest (P&I) senior class (Class AUS). Non-Guaranteed Classes Last First ▪ One subordinate class (Class BUS). Loss Payment ▪ One interest-only class (Class XUS). ▪ Initial principal balances of the Class AUS and Cla
Slide 20: Sample ML-Deal Subordination – Sequential Pay
Sample ML-Deal Subordination – Sequential Pay Last First Loss Payment $277.5 million Freddie Mac Guaranteed Class A Loss Position $300 million Cash Flow ML Certificates fixed-rate and/or floating-rate pool of mortgages $22.5 million Non-Guaranteed Class B ML Certificates First Last Loss Payment ▪ Al
Slide 21: Sample ML-Deal Loss Scenarios
Sample ML-Deal Loss Scenarios The loss scenarios below illustrate how the ML Certificates are affected by TEL defaults and the SCENARIO 1 Freddie Mac Guarantee assuming that the master servicer is no longer making P&I advances with Example of loan loss in respect to the defaulted TELs and the absenc
Slide 22: Sample ML-Deal Loss Scenarios (continued)
Sample ML-Deal Loss Scenarios (continued) The loss scenarios below illustrate how the ML Certificates are affected by TEL defaults and the SCENARIO 2 Freddie Mac Guarantee assuming that the master servicer is no longer making P&I advances with Example of loan loss in respect to the defaulted TELs an
Slide 23: ML-11 Transaction Highlights
ML-11 Transaction Highlights Overview of Deal Structure (Pricing Date: July 21, 2021) Structural Diagram Initial Principal Assumed Freddie Mac or Notional Weighted (Mortgage Loan Seller) Class Amount Spread Average Life Offered ML-11 Certificates: FRETE 2021-ML112 A-US $357,477,000 24 12.66 X-US $35
Slide 24: Loan Performance Resources at your Fingertips
Loan Performance Resources at your Fingertips Performance data for our ML-Deals is Loan-level performance can be accessed in updated monthly at our Multifamily Securities Investor Access tool https://mf.freddiemac.com/investors/data.html Historical information about our Whole Loan Portfolio is avail
Slide 25: Community Reinvestment Act (CRA) and Impact Bonds
Community Reinvestment Act (CRA) and Impact Bonds 25
Slide 26: ML Certificates as a CRA and/or Impact Bonds Investment
ML Certificates as a CRA and/or Impact Bonds Investment Investments in Freddie Mac will provide CRA side letters to investors who wish to claim CRA Guaranteed credit for their investment Certificates may qualify for CRA credit¹, The ML pool consists of affordable housing loans, allowing investments
Slide 27: Stay Up to Date with our Investor Resources
Stay Up to Date with our Investor Resources Impact Bonds webpage – https://mf.freddiemac.com/investors/impact-bonds.html Impact Bonds Issuance Calendar - https://mf.freddiemac.com/docs/impact_issuance_calendar.pdf 2020 Impact Bonds Report – https://mf.freddiemac.com/docs/2020_impact_bonds_report.pdf
Slide 28: Freddie Mac Multifamily and LIHTC Performance
Freddie Mac Multifamily and LIHTC Performance 28
Slide 29: Multifamily Delinquency Rates
Multifamily Delinquency Rates Our disciplined credit practices are one of the main drivers of the continued strong performance of our offerings 1,300 Delinquency Rates FREDDIE MAC (60+ DAY) 1,200 FANNIE MAE (60+ DAY) 1,100 1,000 MF CMBS MARKET (60+ DAY) 900 BASIS POINTS ACLI (60+ DAY) 800 700 FDIC I
Slide 30: Resources – Multifamily Loan Performance Database
Resources – Multifamily Loan Performance Database1 Multifamily Loan Performance Database (MLPD) is available on mf.freddiemac.com. It provides quarterly performance information on Freddie Mac's loans which includes nearly 45,000 loans with a total origination UPB of nearly 600 billion that were purc
Slide 31: LIHTC Performance
LIHTC Performance Within the multifamily space, LIHTC properties exhibited a lower foreclosure rate than conventional multifamily properties Annual LIHTC Foreclosure Rate vs. Conventional Multifamily Delinquency Rate Source: Cohn Reznick: Housing Tax Credit Investments: Investment and Operational Pe
Slide 32: through applicable offering circulars and related supplements, which incorporate Freddie Mac’s Annual Report on
This product overview is not an offer to sell or a solicitation of an offer to buy any Freddie Mac securities. Offers for any given security are made only through applicable offering circulars and related supplements, which incorporate Freddie Mac’s Annual Report on Form 10-K and certain other repor
Slide 33: MULTIFAMILY SECURITIZATION © Freddie Mac
MULTIFAMILY SECURITIZATION © Freddie Mac
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