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Freddie To Do Bigger Business In Small-Loan Space

Drew McCreery, Technical Director of Agency Services, discusses Small Balance Loans in Commercial Property Exec.

For multifamily lenders, small loans are big business. Small loans are estimated to make up almost 30 percent of the multifamily market. In an attempt to become more competitively involved in this space, Freddie Mac last month launched its Small Balance Loan (SBL) Program. The program marks the organization’s entrance into what they’ve called an “under-served” market, and mirrors Fannie Mae’s increased focus on SBLs in its 2.0 guidelines to become effective by the end of the year.

Freddie Mac will use the SBL program to further support affordable housing by providing a platform to purchase and securitize small multifamily loans. The program requires originating seller/servicers to purchase the B-pieces secured by their underlying loan, which in turn can be sold to other investors. To promote liquidity, Freddie Mac has simplified some underwriting and due diligence requirements that will facilitate more competitive pricing and streamlined deal cycles.

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