Freddie Mac anounced last week that it will guarantee its second series of SB Certificates, which are backed by multifamily small balance loans underwritten by Freddie Mac and issued by a third-party trust.
The company expects to guarantee approximately $109 million in SB2 Certificates, which are anticipated to price this week.
For the SB2 Certificates, Wells Fargo Securities will operate as sole lead manager and bookrunner. Arbor Commercial Mortgage originated the 42 small balance multifamily mortgages that are underwritten by Freddie Mac and that back the SB2 Certificates.
Freddie Mac launched the small balance loan initiative at the end of October; it targets loans on multifamily properties with five units or more ranging from $1 to $5 million. Financing may be in the form of either hybrid adjustable-rate mortgages or fixed-rate mortgages. Underwriting guidelines are highly competitive with those of banks, allowing borrowers to finance as much as 80% of the value of a property and to pay only interest for a period of time.
Freddie Mac purchases and aggregates loans by seller and then securitize each seller's deals when pool sizes are approximately $100-$125 million.
In this case, Freddie Mac is guaranteeing four classes of senior securities issued by a third party trust, the FRESB 2015-SB2 Mortgage Trust, and is acting as mortgage loan seller and master servicer.
In addition to the three senior principal and interest classes and the senior interest only class guaranteed by Freddie Mac, the trust will also issue certificates consisting of the Class B, X2 and R Certificates, which will not be guaranteed by Freddie Mac and will be sold to private investors.