1. Maximizing The Use Of 4 Percent Credit NCSHA Annual Conference
September 27, 2016

2. Providing Essential Liquidity
Freddie Mac Multifamily Purchase Volume Q 2016
Financed 357,000 rental units in 1H 2016
$47.3B*
$Billions
$28.8B
$28.3B*
$25.9B*
$26.9B*
$24.0B
$21.6B
$20.3B
$16.6B
$15.4B
$13.0B
$11.2B
FM MF has been a reliable partner to our customers to help ensure that people’s housing needs are met.
After a record-setting 2015, we had record quarterly purchase volume in the first two quarters of 2016.
By working closely with the seller/servicers in our customer network, we purchased $27 billion in MF mortgages in the first half of 2016.
40% went toward acquisitions.
58% refinances.
2% new construction or rehabilitation.
Taking these numbers to a more personal level: FM MF financed 357,000 rental units in the first half of 2016.
And we’ve maintained our mission focus on affordability.
* FHFA has set a volume cap annually since In 2013 and 2014, $25.9 billion; $30 billion in 2015; $35 billion in However, since 2014, certain purchases that promote affordable housing do not count toward the cap; therefore, total purchase volume may exceed the limit. FHFA expanded the definition of uncapped purchases in August 2015 and raised the cap a second time, from $31 billion to $35 billion to $36.5 billion, based on market demand.
Source: Freddie Mac

3. TAH Funding by Year ($ in Millions)
Our Success
TAH Funding by Year ($ in Millions)

4. Supporting Targeted Affordable Housing
Fund properties that receive government subsidy; help coordinate participating entities
Focus
Preservation
Bond credit enhancement
Tax-Exempt Loans
Boost opportunities to maintain subsidy
Make a difference in local markets
Work with a dedicated, cross-functional team
Account for a growing portion of annual purchase volume
“Our aim is to help make financing TAH properties possible – effectively, competitively, and efficiently.”
– David Leopold
VP, TAH Production & Investment
It’s a challenge to attract private funding to this market segment -- more so in times of economic stress.
FM MF is proud to help make a difference.
Vital support, given affordability crisis.
Complex, so work with network of experienced seller/servicers.
Main focus areas: preservation, bond credit enhancements, and TEL.
Preservation – Provide financing to properties developed with low-income housing tax credits 10 or more years ago.
Owners receive low-cost financing for balance of LIHTC compliance period; also may seek new LIHTC allocations at end of period.
This way, the property can remain affordable.
Bond credit enhancement - Work with property owners and institutional bondholders to provide attractive bond financing.
TEL - Alternative to bond credit enhancement. Benefits:
Boosts access to credit for affordable housing; cuts the borrower’s issuance costs and ongoing cost of capital.
Simplifies the closing process.
Lets FM MF securitize more TAH business volume, reducing our risk.
Other support : We accept cash mortgages backed by Section 8 contracts.
Also offer Variable Liquidity Pricing with Tax-Exempt Bond Securitizations (TEBS) and Targeted Affordable Retail Transactions. Flexible alternative for TAH sponsors that need a shorter-term liquidity facility, but longer than the 1-3 years banks offer.
Our presence in TAH has grown in line with market need. In 1H 2016, $3 billion.

5. Contributing to the Preservation of Affordable Rental Properties
Offer Tax-Exempt Loans as an alternative to bond credit enhancement
Best serve properties developed with 4% LIHTC
Securitized through M-Deals
Offer Bridge to Resyndication loans to assist in buying or refinancing LIHTC-eligible properties
Enhanced Value-Add Loans to improve financing for rehabilitation work
Offer Moderate Rehab loans to support significant property renovation
Several offerings expand customers’ options for keeping affordable housing affordable.
TELs help city, county, and state housing authorities do even more good. Most useful in helping properties developed with 4% Low-income Housing Tax Credits maintain affordable status. How they work:
TAH seller/servicer makes loan to housing authority; gets tax-exempt note.
We purchase the loan from the seller/servicer (evidenced by the note).
The issuing housing authority lends the proceeds to borrower to finance MF property that offers affordable rents.
FM MF pools TELs and securitizes them through M-Deal, which enables borrowers with bonds to securitize their investments.
Bridge to Resyndication
Offers efficient, short-term financing (taxable acquisition bridge loan) to help them acquire or refinance LIHTC-eligible properties.
Helps position properties for recapitalization using 4% LIHTCs and long-term FM MF financing, such as TEL.
On conventional side, Moderate Rehabilitation offering provides flexible liquidity source for properties undergoing significant renovation.
And Value-Add offering serves as “one-stop shopping” for upgrade and permanent financing. Enhanced this product based on customer input.
Photo: The Lakewood Apartments, Dayton, Ohio; Freddie Mac Multifamily-funded mortgage
Source: lowincome.rentlinx.com

6. Tax-Exempt Loan New execution for 4% LIHTC
Documented as a loan instead of a bond
Private placement structure with back to back funding
Credit parameters same as our traditional bond credit enhancement:
1.15 DCR / 90% LTV
Terms up to 18 years
Immediate funding and forward commitments executions available
Both fixed and floating rates available
Significant cost savings compared to traditional publically offered bond credit enhancements
Less documentation
Fewer participants
More efficient execution

7. Tax-Exempt Bond Placement Direct Purchase of Tax-Exempt Loan
Side-by-Side Comparison: Tax-Exempt Bond Placement and Direct Purchase of Tax-Exempt Loan
Bond Purchaser
Government Entity as Issuer
Borrower $
Tax-Exempt Bond Placement
Tax Exempt Bonds (payable solely from “Borrower Note”)
Purchase Price (pursuant to “Bond Purchase Agreement”)
Loan to Borrower (pursuant to “Loan Agreement”)
Direct Purchase of Tax-Exempt Loan
Borrower Note
Funding Lender
Governmental Lender
Government Lender Note (payable solely from “Borrower Note”) (Governed by “Funding Loan Agreement”)
Funding Loan to City as “Governmental Lender”

8. Bridge to Resyndication General Terms
Term: 24 months, one 6-month extension with approval
Type: Interest Only
Loan: Floating Rate
Hedge: Not required. Uncapped
Extensions: Freddie Mac approval is required and will be based on progress toward LIHTC resyndication. Fee required.
Sizing: Floating Rate methodology (via 7 year fixed rate equivalent)
Breakage Fee: 2%
Exit fee: 2% (waived if Borrower refinances into a FRE loan)
Loan to Value:
Maximum 85%
Cash Equity Required: 15% (if owned < 3 years)
Minimum Debt Coverage Ratio (DCR):
1.15x standard

9. Bridge to Resyndication Case Study
Located in California
Built in early 1970s, Garden and townhome style units
Amenities include a day care, fitness center, a handball court, tennis/basketball courts, swimming pools, and common laundry facilities
Long term LIHTC Agreement; extended compliance period
Regulatory Agreement with a California Development Authority
Real estate in fair condition (expected rehab = $30,000/unit)
Nationally recognized developer of affordable housing with > 25 years experience in California; repeat FM sponsor
Experienced acquiring and renovating existing properties like the subject; has successfully completed multiple resyndications using 4% and 9% LIHTC and tax-exempt debt

10. For More Information
Freddie Mac Multifamily home page:
Multifamily News Center:
Multifamily News Subscription Center:
My Home by Freddie MacSM:
Shaun Smith, Senior Director, Targeted Affordable Housing