Freddie Mac announced its seventeenth multifamily mortgage backed securities for this year; the $1.1 billion structured pass-through certificates called K-023, is expected to price this week.  

By the end of 2012, Freddie expects to bring to market over $21 billion in K-Deals, through 17 different offerings for an approximately 50 percent increase over its 2011 issuance.

The lastest deal, K-023 is backed by 76 recently-originated multifamily mortgages and are guaranteed by Freddie Mac. It will be offered to the market by a syndicate of dealers led by J.P. Morgan Securities and Merrill Lynch; Pierce, Fenner & Smith Incorporated as co-lead managers and joint bookrunners. Barclays Capital, Guggenheim Securities, Morgan Stanley & Co. and Wells Fargo Securities will serve as co-managers, the GSE said in a press release.

The deal is structured with two senior principal and interest classes, one senior interest only class and a junior interest only class.  Fitch Ratings and Kroll Bond Rating Agency, will assign a provisional rating of ‘AAA’ to the three senior classes of K-023 Certificates.  

"The ongoing success of our securitization program continued to exceed our expectations this year," said Mitchell Resnick, vice president of Freddie Mac Multifamily Loan Pricing and Securitization, in the press release.

Analysts at the Royal Bank of Scotland said in a Dec.4, CMBS report that Freddie Mac’s K certificates combine some of the best features of private label CMBS conduit programs with those of agency multifamily deals making it an attractive complement to CMBS 3.0 mezzanine bonds.  

The investor base in these deals is well diversified with banks currently comprising about one third of the investor base, insurance companies and pension funds accounting for just under one third (30%) and money managers for just above a third (35% to 40%). RBS said that hedge funds, which are drawn to the generous yields and a favorable credit quality of the deals, have also participated on the lower rated, non-guaranteed classes of K-certificates.

“Given that the K-program is only four years old, it is too early to draw conclusions as to the overall credit quality of the program,” said RBS analysts in the report. “However, the program is off to an excellent start with no bands having suffered losses and only one delinquent loan out of the almost 1,950 loans in the program in its first four year. It is also important to note that Freddie Mac underwrites these loans according to its Capital Markets Execution (CME) guidelines which are the same as those used for its on-balance sheet loans, the performance of which has been excellent.”

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