As the commercial real estate market continues to deteriorate and property values maintain their downward trajectory, economists warn that overleveraged apartment owners may find it near to impossible to refinance their outstanding debt.[IMAGE]
As a major player in the multifamily arena, ""Freddie Mac"":http://www.freddiemac.com is keenly aware of the impact this lack of credit could have on the marketplace, and the GSE is taking steps to implement a new lending program specifically targeted at multifamily mortgage refinancing.
The program, which is still under wraps because it hasn't been finalized yet, would tap a small group of third-party ""mezzanine lenders"":http://en.wikipedia.org/wiki/Mezzanine_capital to ensure funding is available for those property owners facing loan maturities.[COLUMN_BREAK]
As explained by ""Nasdaq.com"":http://community.nasdaq.com/News/2010-03/Freddie-Rolls-Out-Mezzanine-Program.aspx, the McLean, Virginia-based Freddie Mac would originate a lower-leverage senior mortgage and work with select mezzanine lenders who would bid on the deal and then provide the additional leverage needed, up to 85 percent. The mezzanine lenders could also acquire B-pieces of new CMBS deals from Freddie.
""There is a market need for this,"" a Freddie Mac spokesperson told Nasdaq.com. ""It is part of our mission to keep the market liquid and capital flowing.""
Indeed there is a market need Ã¢â‚¬" Nasdaq.com says multifamily market participants are calling the idea Ã¢â‚¬Å“innovativeÃ¢â‚¬Â and Ã¢â‚¬Å“progressive.Ã¢â‚¬Â
The initiative would also significantly boost Freddie MacÃ¢â‚¬â„¢s multifamily originations, but more importantly, it would bring substantial movement to the stagnant CMBS market, which for years has been a critical vehicle for mortgage financing, particularly for high-dollar commercial real estate deals.
Freddie MacÃ¢â‚¬â„¢s David Brickman, VP of multifamily capital markets and CMBS, indicated to ""GlobeSt.com"":http://www.globest.com/news/1611_1611/washington/183824-1.html back in January that the GSE was looking to introduce fully-guaranteed securities to accommodate financing needs of more borrowers.
""In general we are moving more fully to a securitization model where the vast majority of assets are purchased and securitized,"" he told the news site.