COVID-19 Updates for our Multifamily Business

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• June 19 SMALL BALANCE LOAN UPDATE
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  To All Optigo SBL Lenders

  Full Underwriting Packages: Back to 9 Business Days

  On May 1, we extended the targeted turn-time for full underwriting packages from 9 business days to 12 business days, following check-in of the full underwriting package and the package passing the submission checklist, due to COVID-19 related circumstances. Now that the volume of transactions has returned to normal and credit revisions related to COVID-19 have stabilized, we’re returning to a turn-time of 9 business days.

• June 12UPDATE ON CREDIT: CONVENTIONAL AND TAH
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  To All Optigo Conventional and Targeted Affordable Housing Lenders

  As the head of underwriting and credit for Freddie Mac Multifamily, my team and I work to balance responsible lending with meeting our mission for affordability and stability.

  The impact of COVID-19 and the economic uncertainty it brought added new challenges. But I’m pleased to see that the credit mitigation efforts we put in place earlier this year have served us well, and the market trends are providing valuable information as we move forward.

  With three months of data on multifamily operations, we are ready to roll back our temporary +0.05x DSCR adder for cash-out refinances for Conventional and Targeted Affordable Housing loans. Seniors Housing and Small Balance Loans will continue with the DSCR adder for the time being.

  We will reassess the temporary -5% LTV adjustment in the future once we begin to see more complete data running through the appraisal reports. For deals on the edge of the credit box, we will base decisions on the stability of the most recent three months’ collections, as well as other criteria.

  We look forward to working with you on your business.

• May 29 DEBT SERVICE RESERVE UPDATES
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  To All Optigo Lenders

  This week we issued new loan agreement provisions stating that the DSR can be released after 12 months, even if federal, state, or local restrictions are still in place, so long as outstanding due diligence requirements and asset-level performance tests are satisfied. We are hopeful this change provides a clear path forward for our borrowers and lessens ambiguity surrounding DSR releases for our Optigo® network.
  
  Conventional and TAH Loans

  • For loans currently in process – new loan agreement provisions to be included in commitments as of Tuesday, May 26.
  • For loans that have rate locked or committed but not yet closed – Optigo lender counsel have now received a form amendment letter drafted and circulated by Freddie Mac Legal earlier this week. The form amendment provisions can be included with other amendments required in the ordinary course, and also include corrections to Schedule 1 breakage provisions in the 5-18-2020 form of commitment.
  • For loans that have closed – rather than amending individual loans, we intend to incorporate the changes in Freddie Mac’s treatment of DSR releases through updates to our securitization documents that will require the servicer to interpret the release conditions as set forth in the revised DSR riders. Freddie Mac will apply the same servicing standard for portfolio loans.

  
  

  Small Balance Loans
  
  We’ve updated the SBL COVID-19 DSR rider. The revision permits borrowers to request release of the DSR to the extent the borrower can satisfy the outstanding due diligence and collections requirements even if federal/state/local states of emergencies remain in effect. If all other conditions are satisfied, the borrower can request the DSR be released 12 months after the first payment date. The revised DSR rider will be implemented based on the status of loans as follows:

  • Prior to final commitment loans: As of May 28, the automated commitment in the Origination and Underwriting System (OUS) will be updated to incorporate the change. Please confirm that the final commitments include the updated provisions.
  • Committed and rate-locked loans: The updated DSR rider may be used for any loans not yet delivered to Freddie Mac and must be documented in a commitment amendment.
  • Previously funded loans: With respect to previously funded loans, we intend to incorporate the changes in Freddie Mac’s treatment of DSR releases through updates to our securitization documents that will require the servicer to interpret the release conditions as set forth in the revised DSR rider. Nothing further will be required on your part.

  Additionally, we have extended the conversion date for any funds remaining in the COVID-19 DSR to 15 months, allowing time for i) borrowers to submit their documentation, and ii) review and approval of the submitted documentation.
  
  If you have any questions, please contact your Freddie Mac representative.

• May 28 MULTIFAMILY SECURITIZATION FORBEARANCE REPORT - MAY
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  To All Optigo Investors

  Freddie Mac’s forbearance relief plan in response to COVID-19 allows qualifying multifamily loans to defer up to three months of mortgage payments.

  Today we released our second forbearance report that provides an overview of this program as of the May 26 security payment date. We plan to release these reports monthly and you’ll find them here.

• May 18 Business Update
  borrowers, financing, conventional, seniors, TAH, affordable, targeted affordable, affordable housing, cash preservation, tax exempt, loans, index lock, fixed rate, seniors housing, student housing, supplemental, unstabilized, sponsors, debt, debt service reserve, DSR, interest, amortizing, collections, LTV, DCR

  

  To Optigo Conventional, TAH and Seniors Housing Lenders

  The market appears to be stabilizing, and we’re pleased that our business model has proved solid and able to deliver for our customers — even in the most challenging markets. As we move forward, we are leveraging what we’ve learned these past few months to re-tool and refresh many of our popular offerings so you can continue to offer your borrowers the most competitive financing.

  These changes are effective Monday, May 18, and apply to our Conventional, Seniors Housing and Targeted Affordable Housing (TAH) Cash Preservation, 9% LIHTC and 4% Tax-Exempt Loans.

  Index Locks

  We’re pleased to reintroduce our Index Lock option for fixed-rate loans. Please note the following Index Lock exclusions:

  • Seniors Housing, Student Housing, supplemental loans
  • Unstabilized products: Lease-up, Moderate Rehab
  • First-time sponsors

  Debt Service Reserves (DSR)

  • Effective for commitments issued beginning May 14
  • The DSR for full-term interest-only (IO) loans will be calculated on an IO basis, not an amortizing basis 
  • The DSR will be waived for low leverage loans defined as 60% LTV/1.45x DCR, subject to collections trend

  We are excited about these updates and look forward to working together with you and your borrowers.

• May 15 Investor FAQs on Forbearance
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  To All Optigo Investors

  We've consolidated a list of Forbearance Frequently Asked Questions for ongoing reference.

• May 15 SMALL BALANCE LOAN UPDATE: BORROWERS IN FORBEARANCE
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  To All Optigo SBL Lenders

  Given the COVID-19 pandemic, you may be working with a Small Balance Loan (SBL) borrower who has deals currently in forbearance with Freddie Mac, or another lender. As a reminder, both borrowers and sponsors must disclose current and prior forbearance arrangements when completing Form 1115-SBL and the loan is also subject to prescreen per Exception #19. If a borrower or sponsor requests forbearance on a loan after Form 1115-SBL has been completed, this is a material change in circumstances and a new Form 1115-SBL should be completed and submitted. Please note, having a deal in forbearance does not preclude SBL from financing another property for the sponsor. See the Borrower & Borrower Principal Forbearance document for more information.

• May 1 Small Balance Loan Update
  loans, small balance loans, SBL, underwriting, production, acquisition, maturity, inspection, inspections, property, property inspections, virtual, virtual inspection, lender, borrower, certification, due diligence, submission

  

  To All Optigo SBL Lenders

  Temporary Cycle Time Extension for

  Due to the high number of packages submitted and additional due diligence being provided as a result of COVID-19, we’ve extended the turn-time for a full underwriting package from 9 business days to 12 business days. The Small Balance Loan underwriting and production teams within each region will work to prioritize acquisition financing requests and maturity deadlines. Please communicate any mandatory deadline at package submission. We will let you know when the cycle times go back to the previous turn-time.

  Virtual Inspection Notification to Freddie Mac

  Virtual inspections should be scheduled through the regional analyst in the same manner as physical property inspections were scheduled. The regional analyst will designate a Freddie Mac representative to participate in the virtual inspection. The Optigo® lender should provide at least 2 business days' notice to coordinate the virtual inspection.

  Borrower Certification of Property Condition

  The Borrower Certification of Property Condition form can now be found on the Originate & Underwrite webpage. If any deferred due diligence is identified, the borrower must complete the Borrower Certification of Property Condition form and the Optigo lender should submit the form with the full underwriting submission.

• April 29 New Multifamily Securitization Forbearance Report
  forbearance, relief, relief plan, loans, mortgage, mortgage payments, servicers, securitizations, forbearance request, master servicer, unpaid principle balance, UPB, maturity, securitized, approved, forborne, securitized deals, deal, deals, SB-Deal, SBDeal, SB Deal, credit, continuity, reporting, remitting, guidance, investor

  

  To All Optigo Investors

  Freddie Mac recently enacted a forbearance relief plan in response to the COVID-19 pandemic that allows qualifying multifamily loans to defer up to three months of mortgage payments.

  Today we released a report that provides an overview of this program as of April 13. As detailed in the report, master servicers reported 327 forborne securitized loans, or roughly 1.4% of our total securitized loan population. This equates to about $1.7 billion of outstanding unpaid principal balance (UPB) and represents 0.6% of our total securitized UPB.

  The data in our report is sourced from four different master servicers – three external and Freddie Mac. The external master servicers reported the forbearance requests that have been approved. Freddie Mac, as Master Servicer for 85% of the forborne loans, also reported loans that have requested forbearance, whether or not the request has been approved.

  We found that roughly one-quarter of all securitized deals have at least one loan forborne. There is a higher percentage of forborne loans in SB-Deals®, which can partially be attributed to how Freddie Mac – the sole Master Servicer of SB-Deals – reported forborne loans not yet approved. It is worth noting that the credit quality of these loans was good leading up to the COVID-19 crisis – over 86% of the loans requesting forbearance have DSCRs above 1.25x and roughly 98% of forbearance loans have a LTV of less than 80%. The report provides additional information around product types, geographical concentration and maturity year.

  For additional details about our COVID-19 continuity plans, check out our COVID-19 webpage. Reporting guidance and remitting examples can be found on the Investor Reporting webpage under the “References” tab.

  Read the Full Report

• April 27 GUIDANCE FOR LOANS WITH DECLINING RENT DUE TO COVID-19
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  To All Optigo Lenders and Borrowers

  We are committed to maintaining liquidity in this evolving market. So, as conditions change, we continue to review and update our approach to due diligence and loan sizing to keep capital flowing while ensuring the safety and soundness of our lending decisions.

  Given the rapid decrease in rental income some properties are exhibiting, we are updating our guidelines for all loans being quoted or under application as of today. These guidelines specify case-by-case reviews of current property performance to determine the impact of any decrease in rental income. This is applicable to all products, including Conventional, Seniors Housing, Targeted Affordable Housing and Small Balance Loans, and it applies to those loans currently under application.

  Please see the attached summary of our underwriting guidelines and contact your Freddie Mac representative for more information.

  We thank you for your attention to this important issue and we thank you for your partnership.

• April 22Targeted Affordable Housing Update
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  To All Optigo TAH Lenders

  Flash back to last year, and it seems difficult to imagine where we are in the world today. In these tough times, we’re thinking of you, your families and your teams and wishing you all the best.

  Amid all that’s changed, we remain true to our mission to provide stability, liquidity and affordability, as Debby Jenkins outlined last week.

  Our mission business with all of you is essential, now more than ever. Low-income renters are often hourly wage earners who may have lost their jobs, among the 22 million Americans filing for unemployment since the start of the pandemic.

  We’re in this together, and we rely on the strength of your partnership to keep our affordable housing business strong. Our teams are working hard to find solutions to move your deals forward — to close, fund and securitize your loans. As new issues arise in the weeks ahead, we’ll continue to focus on getting business done responsibly, addressing concerns, being as transparent as possible and keeping you well-informed.

  More on Debt Service Reserve

  We’ve made a few clarifications to our April 8 Debt Service Reserve (DSR) announcement:

  A DSR is required on all TAH deals — nine months if below 1.40x DCR, or six months if 1.40x DCR or greater.

  Assuming complete full due diligence (per the Freddie Mac Multifamily Seller/Servicer Guide), the following transaction types maynot require a DSR:

  1. Properties with HAP contracts that cover 100% of units with a contract term greater than or equal to the loan term, provided that the annualized HAP payments alone (assuming no tenant rent or commercial income) support breakeven operations
  2. Properties with eight years remaining on the initial 15-year Low-Income Housing Tax Credit compliance period:
     • An unlimited guaranty of operating expenses or deficits is in place at closing, or
     • A limited guaranty of operating expenses or deficits and an operating reserve are in place at closing (or with respect to the operating reserve, will be funded within six months)
       • Limited guaranty must equal to at least six months of operating expenses.
       • Operating reserve must be funded in an amount at least nine months of amortizing debt service.

     In each instance, for a term satisfactory to Freddie Mac.

  3. Unfunded Forwards prior to conversion

  As always, please do not hesitate to reach out to your relationship managers with any concerns or questions.

• April 21 Guidance for Virtual Property Inspections
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  To All Optigo Lenders and Servicers

  During COVID-19, we’ve been looking for ways to balance health and safety with prudent lending practices. A few weeks ago, we released guidance for property inspections. To supplement this document, we’ve created guidance for conducting live virtual property inspections for new loan originations. This alternative method will help protect the health and safety of inspectors, property owners and tenants while also maintaining our best-in-class credit quality.

  View the Virtual Inspections Guidance

  Please also share this guidance with appraisers, engineers, etc., who you engage for property inspections. As a reminder, please adhere to CDC safety guidelines during property inspections.

  If you have any questions, please contact your Freddie Mac representative.

  Stay safe and healthy during this time. We'll continue to update you as needed.

• April 10UPDATED FORBEARANCE RESOURCES TO ADDRESS SBA LOANS
  forbearance, forbearance plan, relief plan, sba loan, sba, small balance administration loan, FAQ, servicing standard, borrower, borrowers, asset management, AMO, conventional, small balance, small balance loans, SBL, TAH, affordable, targeted affordable housing, investor

  

  To All Optigo Lenders

  In response to further developments with COVID-19 and the requirements of the CARES Act, we have updated our forbearance documents. You can find the latest version on our Asset Management webpage under the Asset Management References tab.

  

  We specifically addressed questions regarding the Small Business Administration (SBA) loans in the COVID-19 Forbearance Program FAQs. The questions include:

  Would the borrower obtaining a loan pursuant to the Paycheck Protection Program (PPP) disqualify the borrower from forbearance?
  No. Neither a PPP loan nor a $10,000 grant/advance under the Economic Injury Disaster Loan (EIDL) program automatically disqualifies the borrower from forbearance, but the Borrower must still comply with the underlying loan document requirements.

  Are our borrowers permitted to obtain SBA grants or loans?
  Yes, depending on whether it is an SBL, TAH, or Conventional borrower, and with some limitations.

  • Under the SBL program, an unsecured loan such as the PPP, or the $10,000 up-front SBA grant would generally be permitted under our loan docs. The borrower would need to consult its loan documents to determine eligibility.
  • Under the Conventional or TAH program, SPE restrictions will likely prohibit a borrower from obtaining even an unsecured PPP loan without prior lender consent. Borrowers should consult their lenders regarding specific facts and circumstances.
  • We anticipate limited participation of SPE borrowers in the PPP since availability of funding under the PPP is based upon historical payroll expenses of the borrower and payroll expenses for multifamily properties tend to be a smaller portion of a borrower’s expenses.
  • For existing loans, a PPP loan or any other SBA emergency relief loan that is secured by the Mortgaged Property (such as an EIDL) requires the prior written consent of the lender to avoid a default under the loan documents.
  • Non-SPE entities in the ownership structure, or manager affiliates of the borrower may freely pursue both SBA grants and loans (secured or unsecured) without prior lender consent so long as any collateral provided for the SBA loan doesn’t include any asset covered by the Freddie Mac loan or a security interest in the ownership interests of the Freddie Mac borrower.

  Please refer to the FAQs document for additional details.

  If you have any questions, please contact your Freddie Mac representative.

  Although the FAQs document attempts to provide reliable, useful information, any information or analysis shared in this document is provided for informational purposes only. Optigo® lenders and borrowers must make their own determination as to the appropriate information and resources to use in order to satisfy their obligations under the applicable loan documents, laws and regulations.

• April 8TAH Update on DSR
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  To All Optigo TAH Lenders

  A Debt Service Reserve (DSR) will be required on all Targeted Affordable Housing (TAH) deals (nine months if below 1.40x DCR / six months if 1.40x DCR or greater).

  Assuming full due diligence (per the Freddie Mac Multifamily Seller/Servicer Guide) is complete, the following transaction types may not require a DSR:

  • Project-based HAP contract on 100% of the units with a contract term greater than or equal to our loan term
  • Eight years remaining on the initial 15-year Low-Income Housing Tax Credit compliance period
  • Unfunded forwards during the unfunded period

  NOTE: Freddie Mac retains the right to make additional adjustments to credit (including adjusting transaction structure, loan amounts, or requiring a DSR) on all TAH products (including Forward Conversions) based on individual deal terms/circumstances/incomplete due diligence.

• April 7Debt Service Reserve Required for All Loans
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  To All Optigo Lenders

  As part of our commitment to safely maintain liquidity and stability throughout all economic cycles, we are continually evaluating market conditions and adjusting our business to address evolving conditions. In light of this, we are now requiring a Debt Service Reserve (DSR) for all loans that have yet to be committed. As will be more particularly described in the loan documents,  the reserve will be released once the COVID-19 crisis emergency declarations are lifted, full due diligence is confirmed and the property is performing.

  Below are specific DSR requirements for our various business lines:

  • Conventional – A six- to nine-month DSR is required, regardless of due diligence.  
  • For a loan sized to a minimum 1.40x amortizing DCR or greater, irrespective of the actual interest-only period of the loan, the DSR amount will be six months amortizing debt service.
  • For a loan sized to an amortizing DCR below 1.40x, irrespective of the actual interest-only period of the loan, the DSR amount will be sized to nine months of amortizing debt service.
  • TAH – Cash preservation follows DSR guidelines set for Conventional; other products will be structured as appropriate for that individual deal.  
  • SBL – 12-months DSR is required for all loans. We have extended the lender repurchase period to at least 18 months.
  • Seniors – A minimum 12-month DSR is required.
  • Student – A 12- to 18-month DSR is required to cover through the start of the 2021/2022 school year.
  • Supplementals – A 12-month DSR for the entire debt stack will be required.

  If you have any questions, please reach out to your Freddie Mac representative.

• April 6Contingency Plan in Effect April 1
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  We previously released a contingency plan for temporary changes to our Final Delivery Package Requirements (the Contingency Plan) in the event of (i) widespread disruption in the overnight package delivery system, or (ii) corporate decisions by Freddie Mac, warehouse lenders, Optigo® lenders and/or closing counsel that would limit our or their ability to either deliver or receive original loan documents.

  After receiving requests from numerous Optigo lenders and closing counsel, we decided to implement the Contingency Plan, effective April 1, 2020. The Contingency Plan will remain in effect until we deliver the Discontinuance of Contingency Plan Notification. Although the full text of the Contingency Plan is set forth in your letters of commitment, as amended, please note the following effective as of April 1:

  • If you are serving as a bailee for Freddie Mac (each, a Bailee), and/or if another party is serving as a Bailee, you will direct each Bailee to: (i) continue to hold any original loan documents in such Bailee’s possession, including any slip pages, (ii) cease delivery of any original loan documents until your receipt of the Discontinuance of Contingency Plan Notification, and (iii) complete and execute the form of Bailee Acknowledgment for each mortgage loan and for any subsequent deliveries.
  • You or your counsel shall (i) submit the executed Bailee Acknowledgment(s) in the Document Management System (DMS) for each mortgage loan contemporaneous with the delivery of the electronic delivery portion of the Final Delivery Package, and (ii) provide email notification to Freddie Mac at MF_Delivery_Notification@freddiemac.com when such Bailee Acknowledgment(s) and the electronic delivery portion of the Final Delivery Package have been submitted to Freddie Mac via DMS.
  • Any additional Bailee Acknowledgments required in connection with slip pages should be submitted in DMS for such mortgage loan contemporaneous with the electronically delivered slip pages.
  • We also modified the Warehouse Lender Release of Security Interest (Form 996M) to account for the scenario in which your warehouse lender (or your closing counsel on behalf of such warehouse lender) maintains possession of an original note and must continue to possess such note as a Bailee until we deliver the Discontinuance of Contingency Plan Notification. Revised Form 996M has been delivered to each warehouse lender.

  While we do not like disrupting our standard delivery processes, we think this is in the best interests of all to better protect staff needed to gather and send or receive the documentation, to prevent documents from being delayed or lost in transit, and to ensure we are in the best position to continue to purchase closed loans in a timely manner in the face of constantly evolving disruptions.

  Resources:

  • Bailee Acknowledgment Form for Optigo Lenders and Closing Counsel
  • Omnibus Amendment; First Amendment to Omnibus Amendment
  • Updated Commitment Language (Contingency Plan)
• April 3SBL COVID-19 PROGRAM UPDATE AND CLARIFICATION
  SBL, small balance loans, credit, originate, underwrite, under app, risk, credit risk, exception, loan, seasoning, loan seasoning, performance

  

  To All Optigo SBL Lenders

  Due to the circumstances surrounding COVID-19, Freddie Mac Small Balance Loan (SBL) has made temporary changes to our credit requirements. We’ve summarized our temporary credit changes in the SBL COVID-19 Credit & Program Update that is posted on the Originate & Underwrite (O&U) webpage. The changes are effective for all deals taken under app on or after April 2, 2020, unless we have previously communicated otherwise or as specified in the document. Should you have any questions, please reach out to your Freddie Mac relationship manager.

  Programmatic Exceptions and Credit Risks

  We’ve updated our Program Exceptions and Credit Risks document, along with the Prescreen and Exception Request form to reflect recent changes. You can find these documents on the O&U webpage under References & Tools and Requests & Approvals.

  Program Updates FAQs

  We’ve received numerous questions regarding recent program changes. In an effort to consolidate and address the frequently asked questions, we’ve posted a document titled SBL COVID-19 FAQs on the O&U webpage under References & Tools. Check it out!

• April 2Asset Management & Operations Update
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  To All Freddie Mac Multifamily Servicers

  With the COVID-19 situation rapidly evolving, we're sending a compilation of the latest servicing updates to ensure all our partners are hearing directly from us.

  We’re focused on ensuring the safety and well-being of our customers and staff. As shelter-in-place orders and similar government mandates are enforced, we've updated the Freddie Mac Multifamily Servicing Standard and certain policies. Our goal is to reduce disruptions and to maintain the course of business, to the extent possible.

  Please reach out to your Freddie Mac Multifamily representative should you have any questions about the information below.

  Our Relief Plan

  Last week we released a relief plan for borrowers, their properties, their tenants and associated loans impacted by COVID-19. Since then, Congress passed the CARES Act and we are adjusting to make sure we’re in full compliance with those regulations.

  Access the latest forbearance agreements, procedure guide and FAQs on our Asset Management webpage under the Asset Management References tab.

  Reporting and Remittance on Forbearance Loans

  We've created guidance for reporting on loans in forbearance. The guidance includes submitting:

  • Investor Reporting Packages to the master servicer 
  • Pre-securitized forbearance loans to Freddie Mac in MSIR

  We’ve also posted a remitting example of how P&I payments and Impounds and Reserves would be reported and remitted during the 12-month forbearance period.

  The reporting guidance and remitting example can be found on the Investor Reporting webpage under the References tab.

  Delivery Stoppage of Final Delivery Packages

  On March 13, we developed a contingency plan for the delivery of physical final delivery documents to ensure the safety and well-being of all parties, and to prevent documents from being delayed or lost in transit. Effective April 1, we activated the delivery stoppage.

  Servicers should now retain all original documents related to approved servicing transactions or loan document corrections, and instead complete and submit the Servicing Bailee Acknowledgment in the Document Management System (DMS). Freddie Mac will retain its required original signatures for approved servicing transactions and will deliver PDF copies of such signatures to servicers to include in the electronic version of the document uploaded to DMS.

  If there are other obstacles to closing an approved servicing transaction related to original signatures or recordation, please contact the Freddie Mac attorney named in the approval letter.

  Green Reporting Deadline Extended

  We’ve extended the benchmarking metrics reporting deadline for Freddie Mac Multifamily Green Advantage® loans from March 31 to May 31. For assistance completing the benchmarking reports, please refer to the guides on this page in the Resources box.

• April 2Targeted Affordable Housing Update
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  To All Optigo TAH Lenders

  We’ve highlighted some key takeaways from yesterday’s update — and provided some additional details for our TAH lenders:

  Debt Service Reserve

  We’re here to support the market — and to help keep it going in difficult times.

  One way we’re tackling our challenges is through Debt Service Reserve (DSR) — a new option in the current environment when full due diligence is not feasible.

  We announced yesterday that we’ll accept deals with modified due diligence — related to third-party reports and property inspections — with at least a six-month DSR. We’ll release the reserve once the COVID-19 crisis is over, full due diligence is confirmed and the property is shown to be performing.

  Please note that the Debt Service Agreement will be forthcoming.

  Here’s how the DSR works for TAH cash preservation loans:

  • For a loan sized to 1.40x amortizing DCR or greater, irrespective of the actual interest-only period of the loan, the DSR amount will be sized to six months amortizing debt service.
  • For a loan sized to an amortizing DCR below 1.40x, irrespective of the actual interest-only period of the loan, the DSR amount will be sized to nine months of amortizing debt service.

  Other products will be structured as appropriate for individual deals.

  For commercial tenants on a property, whose clients are not solely property residents, we will not give credit for commercial income and will underwrite much less of the space’s value. We may make some exceptions for already long-established essential businesses, like a pharmacy, or certain high credit-rated businesses.

  Cash-out refinances: DCR and LTV credit parameters will be tightened by +0.05x and -5%, respectively, when a property’s rents are near or at market rents of comparable properties. This happens most often in preservation transactions. 

  If there is a considerable gap (typically 20%) between a property’s rents and those of comparable market-rate neighborhood properties, we will continue with our normal DCR and LTV credit parameters. This includes properties receiving subsidies and HAP contracts where rent collected is near or at market.

  Forbearance Changes

  Since we issued our press release on forbearance last week, Congress has now passed the CARES Act. Here's how we’re adjusting our program to fully comply with those regulations.

  During these tough times, we wish you, your teams and your family all the best. Stay healthy and safe.

• April 1Our Latest Business Updates
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  We are committed to providing stability and liquidity to the multifamily finance market. In light of COVID-19, we have been adapting to keep business moving in a safe and sound manner while maintaining the safety of our staff, customers, borrowers and their renters.

  FORBEARANCE

  Last week we issued a press release regarding our approach to dealing with affected properties and associated loans. Since then, Congress passed the CARES Act and we are adjusting to make sure we’re in full compliance with those regulations.

  • We are encouraging borrowers to only enter into a forbearance agreement if it is needed to continue their business operations.
  • To align with the CARES Act, the latest date to enter into a Forbearance Agreement will be the earlier of the termination of the National Emergency declared by the President of the United States and December 31, 2020.
  • Borrowers will repay forborne amounts over a period of 12 months, but they have the option to pay it back sooner. No late fees or interest charges will be applied during the forbearance period.
  • We have developed a standard forbearance form/agreement that is non-negotiable. Borrowers also must submit a hardship letter explaining their circumstances and attach a tenant delinquency and forbearance report demonstrating the effect of the national COVID-19 emergency on the property’s operation and performance. 
  • Borrowers must agree to a moratorium on evictions during the forbearance period. This includes a prohibition on initiating the eviction process or pursuing current evictions already in process.
  • Borrower must remain in compliance with all other terms and conditions of the Loan Documents and at all times comply with all laws (including the CARES Act), ordinances, rules, regulations and requirements of any governmental authority having jurisdiction over the property.

  DEBT SERVICE RESERVE

  Freddie Mac is fully committed to maintaining liquidity in the market despite the challenges of COVID-19. We realize that performing full due diligence in the current environment is challenging so we are offering an option that provides certainty of execution, despite those obstacles. We are now accepting deals with modified due diligence but will require a minimum six-month Debt Service Reserve (DSR). The reserve will be released once the COVID-19 crisis is over, full due diligence is confirmed and the property is shown to be performing.

  • For a loan sized to a minimum 1.40x amortizing DCR or greater, irrespective of the actual interest-only period of the loan, the DSR amount will be sized to six months amortizing debt service.
  • For a loan sized to an amortizing DCR below 1.40x, irrespective of the actual interest-only period of the loan, the DSR amount will be sized to nine months of amortizing debt service.

  There will also be a DSR requirement for all loans that are not yet committed for the offerings below:

  • Student – A 12- to 18-month DSR is required to cover through the start of the 2021/2022 school year.
  • Seniors – A minimum 12-month DSR is required.
  • TAH – Cash preservation follows Conventional guidelines above; other products will be structured as appropriate for that individual deal.
  • SBL– 12-months DSR is required for all loans. We have extended the lender repurchase period to at least 18 months.
  • Supplementals– A 12-month DSR for the entire debt stack will be required.

  PRODUCTION UPDATE

  Unstabilized Offerings
  Until our view of the market is clearer, we are narrowing our focus on unstabilized offerings such as Lease-Up, Value-add and Moderate Rehab.

  Student Housing
  We are narrowing our focus for student housing property refinances until fall of 2020. This will give us time to see what impacts COVID-19 ultimately has on the student housing sector. We will consider student housing acquisitions on a very limited basis but have seen that pipeline organically diminish with the uncertainty in this space.

  Seniors Housing
  We are narrowing our focus on refinances for seniors housing properties until we see how this market recovers from the pandemic.

  Supplementals
  Supplementals will not be considered for properties that have elected for forbearance.

  UNDERWRITING UPDATE

  Credit changes will be different by product, market and individual properties but our goal is to continue to deliver liquidity in a safe and sound manner.

  • We are taking a more conservative approach for cash-out loans at this time.
  • We have adjusted market tiers for cities with a high reliance on oil or tourism — specifically, Houston, Las Vegas, New Orleans and Orlando. These cities have been moved to Tier 6, resulting in a starting point of -5% LTV and +.05x DCR.
  • Commercial Income – We are taking a more critical and limited view of commercial income in consideration of long-term viability.

  RATE-LOCKS 

  • Index Locks and early-rate locks (ERL) are suspended for all products. We have permanently removed Index Locks for supplementals, seniors, student loans and specialty products.
  • Standard Rate-lock Agreements will be modified and, once they resume, ERLAs and Index Lock Agreements will be modified to remove 2% breakage cap on all locks (i.e., ERL, standard, index).

  TREASURY FLOORS

  • Treasury floors are now the greater of 0.75% or 0.15% below current Treasury at the time of quote for all products, except supplementals.
  • We’ve also added a Treasury floor of 0.75% on all supplementals, regardless of loan term.

  QUOTES 

  • First quotes issued are valid for five business days instead of 10, and subsequent quotes will remain unchanged at five business days.
  • We are no longer waiving good faith deposits for Select Sponsors. 

  CAPITAL MARKETS UPDATE

  Despite high levels of volatility across all markets in the last few weeks, we are feeling encouraged by some recent improvements and rebounds. We continue to issue new securitizations across all major products (K-fixed, K-floating, and SBL) and continue to maintain an active calendar throughout April.

  Thank you for your continued partnership with us during this challenging time.

• March 30Temporary SBL Debt Service Reserve
  small balance loan, small balance loans, SBL, debt, debt service, underwriting, liquidity, loan documents, commitments, debt service reserve, DSR, DCR, debt coverage, appraisal, inspection, risk, principal, interest, mortgage, borrower, underwrite, forbearance, occupancy, loan agreement, payment, repayment, origination, refinance, CARES Act, Capital Replacements, zoning

  

  To All Optigo SBL Lenders

  The circumstances surrounding the COVID-19 pandemic have caused unprecedented disruption in fulfilling certain underwriting and purchase requirements, such as site inspections and third-party reports. To continue to provide liquidity for borrowers, the Freddie Mac Small Balance Loan (SBL) team will temporarily require a 12-month Debt Service Reserve (DSR) for all new and uncommitted SBL loans during this time, effective March 30. All commitments will require inclusion of the COVID-19 Debt Service Reserve Rider, which will be posted shortly on our website with our other loan documents. Until it is posted, the rider will be attached to issued commitments.

  With this DSR in place, Freddie Mac SBL may allow loans to proceed amid the potential economic impacts of COVID-19 and be purchased with certain modified due diligence reports, such as appraisal, zoning, inspection, physical risk report and seismic.

  Accessing Funds to Pay the Mortgage: The borrower will need to submit a request with supporting documents showing less than breakeven collections to be able to apply funds from the DSR to the payment of principal and interest.

  Releasing Funds Back to Borrower: The release of the remaining DSR will be within 30 days following satisfaction of the following five items:

  • Lender receives a release request from the borrower.
  • All federal, state and local emergency declarations or similar government actions related to COVID-19 have been lifted for at least 90 days.
  • All due diligence items have been completed to Freddie Mac’s specifications and borrower has remediated all deferred due diligence shortfalls.
  • If borrower and Freddie Mac entered into a forbearance agreement, all of the forborne debt service payments have been repaid.
  • Borrower provides evidence satisfactory to Freddie Mac of residential occupancy at a minimum of 80% and collections, on a three-month average and for the last month, that satisfy the policy minimum underwritten Debt Coverage Ratio (DCR) for the loan. For example, 1.20x for Top Markets, 1.25x for Standard, etc., with appropriate adjustments for cash-out, full-term interest-only, etc.

  Here are a few additional details to note:

  • If the borrower does not satisfy the five items above within 12 months after the Effective Date of the Loan Agreement, the remainder of the DSR will be used first to pay down any remaining forborne debt service and then transferred to the Capital Replacement and Repair Reserve for the balance of the loan term and may be used to reimburse the borrower for the cost of Capital Replacements.
  • Borrowers may choose to participate in forbearance per the terms of the CARES Act and Freddie Mac’s guidelines. If the borrower chooses forbearance, the forborne payments will be spread over the following 12 months’ debt service payments. If borrower’s repayment of forborne amounts begins while the DSR is still in effect, for any month where collections are below breakeven, borrower may also apply the DSR to that month’s 1/12 repayment of the forborne amount.
  • For properties located in areas where Freddie Mac requires a seismic report, SBL will require the borrower to carry earthquake insurance on the property until a satisfactory seismic report is complete.
  • The lender must provide evidence that the recordation office has received the request to record in order for Freddie Mac to purchase the SBL loan.

  Please visit our Origination and Underwriting page that includes the new documents for the DSR.

  We’ll continue to assess the situation surrounding COVID-19 impacts on the SBL business. Please take note of the credit changes to cash-out refinances and commercial income we rolled out last week. We look forward to closing more SBL loans with you, and we appreciate your patience as we continue to come up with workable solutions during this uncharted time.

• March 25Small Balance Loan Update
  authorization, authorizations, temporary, SBL, small balance, small balance loans, underwriting, prepayment, credit, forbearance, inspection, inspections, originate, originations, equity, underwrite

  

  To All Optigo SBL Lenders

  Temporary Authorization – Immediate Updates to SBL Underwriting

  Amid market volatility, Freddie Mac remains steady and open for business. But due to current market conditions, we're making two temporary underwriting changes to our SBL program as follows:

  • Effective as of the date of this communication, any loan taken under application that involves a borrower taking cash equity out of the transaction will require a 0.10x increase to DCR and a 5% reduction in LTV. Cash equity out of the transaction will be defined as any cash proceeds greater than 3% of the existing mortgage loan plus junior capital and prepayment penalties.
  • Effective as of the date of this communication, for any loan taken under application or not yet committed to by Freddie Mac: Commercial space will be underwritten as if completely vacant, even if occupied. In extremely limited circumstances, and subject to approval by Catherine Evans, vice president of SBL Underwriting, underwriting income from a supply chain critical and/or credit tenant will be considered on a case-by-case basis.

  Freddie Mac Multifamily is making credit parameter adjustments across all business lines. These temporary measures will remain in effect until further notice. We continue to look at other ways to address cash-out transactions.

  Forbearance

  Freddie Mac has developed an approach to deal with impacted borrowers, their properties, their tenants and associated loans. You've likely already received an email in regard to our forbearance approach. If not, please reach out to your Freddie Mac representative for the details.

  Inspection Guidance

  We've posted a document titled COVID-19 SBL Inspection Guidance on Freddie Mac's Originate and Underwrite webpage under References & Tools regarding guidance and ideas on how to conduct an inspection in the current environment. Please note, we are not requiring anyone to enter occupied units at this time, however, inspections are a risk mitigant. We urge everyone to keep CDC safety guidelines in mind.

• March 24Forbearance, Extensions, Breakage Language
  forbearance, extensions, legal, LIHTC, conversions, loans, breakage, forwards, fee, fees, affordable, affordable housing, TAH, targeted affordable housing

  

  To All Optigo Targeted Affordable Housing Lenders

  Forbearance

  We are offering forbearance up to 90 days and created guidelines for servicers and legal counsel.

  Extensions Announcement Coming Soon 

  We plan to announce extension terms for cash preservation and portfolio loans under application that can’t close in time due to the current situation. Immediate Tax-exempt Loans (TELs), immediate 9% LIHTC and forward conversions can use existing extension features that are standard for these products.

  Breakage Language for TELs, 9% LIHTC and Non-LIHTC Forwards

  Standard breakage language has been added to TEL products, and we have eliminated the cap on breakage for 9% LIHTC and Non-LIHTC forwards. As always, Freddie Mac will pursue the borrower for any breakage fee that is above the good faith deposit.

• March 24 Press Release: Nationwide COVID-19 Relief Plan
  borrowers, properties, loan, loans, investors, forbearance, residents, investor

  Today we announced a nationwide relief plan for Freddie Mac Multifamily borrowers and residents of their apartment properties. Under this program, multifamily landlords whose properties are financed with a Freddie Mac Multifamily fully performing loan can defer their loan payments for 90 days by showing hardship as a consequence of COVID-19 and by gaining lender approval. In turn, we are requiring landlords not to evict any tenant based solely on non-payment of rent during the forbearance period. Through partnership with our network of Optigo® lenders and investors, we anticipate that the program can provide relief for up to 4.2 million U.S. renters across more than 27,000 properties.

  “This program is historic in its size, and it has the potential to provide relief to millions of families in multifamily rental homes financed through a Freddie Mac loan,” said Debby Jenkins, executive vice president and head of Freddie Mac Multifamily. “Countless Americans are facing unimaginable hardships, and Freddie Mac is doing what we can to provide relief as our nation addresses this global pandemic.”

  Freddie Mac Multifamily's coronavirus forbearance program is modeled on its industry-leading disaster-relief forbearance plan introduced in the wake of Hurricane Harvey in 2017. Since then, Freddie Mac has implemented the forbearance plan in response to other natural disasters, including additional hurricanes and the California wildfires.

• March 18 Legal Update for All Optigo Lenders
  title, titling, legal

  

  The American Land Title Association (ALTA) is tracking the operating status of recording jurisdictions around the country based on reports from ALTA members, colleagues, and State/Regional Land Title Associations. You may access ALTA’s Recording Jurisdiction Operating Status Report here: https://www.alta.org/business-tools/coronavirus.cfm.

• March 17 TAH Update: Remaining Steady
  production, underwriting, lock, locks, rate locks, index, index locks, fee, fees, breakage fee, rate, fixed-rate, loan, loans, breakage, deposit, deposits, floors, treasury, treasury floors, quote, quotes, inspection

  

  To All Optigo Targeted Affordable Housing Lenders

  Amid intense market volatility, we remain steady and open for business — ready to quote your deals, close and securitize.

  Here’s where you can help us respond as efficiently as possible: check the thoroughness and quality of your packages carefully so we can provide accurate, timely pricing. Remember that joint underwriting is an especially good option right now; check with your relationship manager for details.

  A complete package must include: all construction review materials for rehabs, copies of appraiser engagement letters signed shortly after taking an application, all required legal analyses, all LURAs, as well as complete and final organization charts.

  Recent Announcements

  • We are taking a pause on all Index Locks and early-rate locks.
  • We previously implemented a suspension of Index Locks for specialty products, but due to current industry issues, both Index Locks and early-rate locks are temporarily paused for all products as we evaluate the market and our offering.
  • Eliminating the cap in the breakage fee formula for fixed-rate loans, starting with commitments issued today; breakage will now be calculated without the 2% cap. As always, Freddie Mac will pursue the borrower for any breakage fee that is above the good faith deposit.
  • No longer waiving good faith deposits for Select Sponsors.

  Reminders

  • Treasury floors are now the greater of 0.75% or 15 bps below current Treasury for all products, except supplementals.
  • We’re also adding a Treasury floor of 0.75% on all supplementals, regardless of loan term.
  • First quotes issued are valid for five business days instead of 10, and subsequent quotes will remain unchanged at five business days.

  Inspections

  We’re developing solutions for situations where the complete due diligence requirements for a Freddie Mac loan can’t be completed. Our teams will make decisions on a case-by-case basis on individual property inspection waivers and risk mitigation.

  Customer Visits

  We’re now conducting all meetings virtually. Please contact your relationship manager if in-person meetings are business-critical.

  Final Delivery Packages: Contingency Plan

  Please see Friday’s announcement on our contingency plan for final delivery packages in case of disruptions.

  We have a vital mission and a critical role in the markets — all the more significant in times like these. We will continue to partner with all of you to strengthen your business. Thank you for your flexibility and support. And stay tuned.

• March 17Property Inspections
  property, inspection, inspections, property inspections, due diligence, underwriting, conventional, targeted affordable, seniors, small balance, loan, loans, TAH, SBL, affordable

  

  To All Optigo Lenders:

  We consider the health and safety of our employees, Optigo® lenders, property owners, managers and residents to be of the utmost importance.

  As the current situation changes moment by moment regarding travel and “social distancing,” we are balancing health and safety with prudent lending practices.

  Property inspections are critical to the commercial real estate and lending markets, and the current situation is making this more difficult. Given increasing hesitation for all parties to travel — and from owners, managers and residents to allow in-unit inspections of their properties — we are working with our teams to develop solutions to situations where the complete due diligence requirements for a Freddie Mac loan cannot be completed as usual. Unfortunately these solutions will vary by product, property type, location and level of due diligence waivers that are being sought — along with mitigants to the increased risk associated with a particular property inspection waiver.

  Due to the number of different types of requests we are receiving, we can’t provide a one-size-fits-all solution.

  That said, we are empowering our regional leadership teams with the ability to make decisions on a case-by-case basis as to how each individual property inspection waiver can be viewed from a risk mitigation perspective. The answer may vary, and Conventional, Targeted Affordable, Seniors Housing and Small Balance Loans will all have a different solution as each has a different risk profile and underwriting process.

  Please work with your regional and/or product leadership teams to ensure that your individual situation is addressed.

  Thank you for your flexibility as we tackle this issue together.

• March 16Business Update
  treasury, treasurys, conventional, targeted affordable housing, tah, affordable, lock, locks index, index locks, floors, treasury floor, loan, term, loan term, deposit, deposits, fee, breakage, breakage fee, title

  

  To All Optigo Lenders:

  Freddie Mac is fully engaged in addressing changing market conditions and is working to ensure you are kept updated. If you have any questions about the update below, please reach out to your Freddie Mac Multifamily representative.

  With market turbulence intensified by public health news and the oil fight, Treasurys continue to reach new lows, and we are committed to serving our mission.  As you’ve likely read, recordation and closing agencies are starting to report closures. We are working with our Optigo® lenders, legal teams, title companies and closing offices to determine potential resolutions. To ensure we can provide the service you and your borrowers expect, we are implementing the following changes for Conventional and Targeted Affordable business:

  • We previously implemented a suspension of Index Locks on specialty products, but due to current industry issues, all Index Locks and early-rate locks have been temporarily paused for all products as we evaluate the market and our offering. Please see the update below for full details.
  • Treasury floors are now the greater of 0.75% or 15 bps below current Treasury for all products, except supplementals.
  • We’re also adding a Treasury floor of 0.75% on all supplementals, regardless of loan term.
  • First quotes issued are valid for five business days instead of 10, and subsequent quotes will remain unchanged at five business days.
  • We are no longer waiving good faith deposits for Select Sponsors.
  • Beginning with commitments that are issued tomorrow, we are eliminating the cap in the Breakage Fee formula for fixed-rate loans; breakage will now be calculated without the 2% cap. As always, Freddie Mac will pursue the borrower for any breakage fee that is above the good faith deposit.

  In response to public health concerns, we’re seeing many organizations move to flexible work arrangements, and Freddie Mac is doing the same and leveraging technology to maintain business functions seamlessly.

  Our One-Team strategy is paying off, and we’re sharing resources across business lines and regions as needed. That said, please ask your teams to be patient as we work to adjust to this new normal.

  Transparency and communication have always been our hallmarks, and now more than ever, we will do our best to keep you informed on our strategy and any updates going forward.

  Providing liquidity and ensuring there is stability in the multifamily space is a critical role of Freddie Mac. This is why we are here and why we will stay committed to partnering with you and your borrowers throughout the year.

  Thank you for your business. And on a personal note, stay safe.

• March 16Rate Lock Update
  rate, lock, rate lock, rate locks, conventional, targeted affordable, TAH, index, index lock, ILA, student, student housing, seniors, seniors housing, ERLA, early rate lock

  

  To All for Conventional and TAH Optigo Lenders

  Freddie Mac is taking a pause on Index Lock Agreements. Effective immediately, Freddie Mac hereby with this communication rescinds and revokes each and every Index Lock Agreement (ILA) that has been issued by Freddie Mac to an Optigo® lender that has not yet been signed and uploaded to the Document Management System (DMS) by the Optigo lender, in accordance with Section 1 of the ILA.

  For those transactions other than student housing, seniors housing, lease-up, and supplemental loans, we currently intend to reissue a new ILA as soon as reasonably practicable, if the Optigo lender requests it.

  Every ILA that has been accepted and received by Freddie Mac via DMS as of the time of this email will remain in full force and effect and will be processed in accordance with our then-current business practices when we resume our Index Lock activity.

  Additionally, effective immediately, Freddie Mac will no longer interest rate lock any Early Rate Lock Application (ERLA) that has not yet been signed and uploaded into DMS by the Optigo lender. We currently intend to reissue revised ERLAs as soon as reasonably practicable when we resume our early-rate locks.

  Thank you for your understanding of these changes. We appreciate your continued partnership — and your business — as we navigate this extraordinary situation together.

• March 13Contingency Plan for Final Delivery Packages
  contingency, delivery, final delivery, packages, delivery packages, asset management, loan, loans, loan documents

  

  To Underwriters and Servicers

  In light of current public health concerns, we have created a contingency plan for final delivery packages should there be obstacles to delivering loan documents. Our goal is to minimize potential impacts to our ability to fund the loans you have closed.

  View the Contingency Plan

  The safety of our customers and staff is our utmost concern. We will continue to assess the situation and provide further updates.

• March 9Staying the Course in Volatile Markets
  treasury, treasurys, spreads, floor, floors, treasury floor, quote, quoting, spread, index, index lock, locks, quotes, small balance loans, SBL, refinance, inspection, inspections, property, property inspections, rate, rates, certainty

  

  To All Optigo Lenders

  The week has just begun, and Treasurys continue to drop to historic lows. Spreads have widened markedly, and we are all watching the unprecedented volatility across the financial markets, including oil and equities.

  We are showing our support by responding to inflows, but even though we are quoting all deals, you may see some longer turnarounds. We believe the newly instituted Treasury floor — the greater of 75 bps or -15 from the Treasury at the time of quote — should provide more stability and certainty for quoting, especially in conjunction with our 60-day spread hold (90+ days for TAH) and our ability to index lock. The certainty we provide is more important than ever.

  We’ll continue to adjust the grid and quote timelines in response to market volatility. Please encourage your teams to use the published grids for soft quotes and to narrow down scenarios, so we can better manage the pipeline and focus on live opportunities.

  Quote Timelines

  All quotes will be active for five business days, even initial quotes.

  Small Balance Loans

  We continue to actively move SBL grids given rate volatility and volume. Also, given the current levels of the 10-year U.S. Treasury, we are considering coupon floors. We will be watching this week’s SB72 transaction to determine how this spread volatility is affecting our SBL securitizations. Be on the lookout for updates from our SBL team later this week.

  Refinance Tests

  Keep in mind that the very favorable rate environment may result in more Refinance Test result failures. We will evaluate each failure, but note that because of the current environment we will have less appetite for Refinance Test exceptions, especially on the higher end of the leverage scale.

  Inspections Continue as Travel is Minimized

  All non-essential business travel by our staff is on hold for a period of 60 days, through Sunday, May 3, or until further notice. Only essential business travel will be allowed, and essential includes travel needed to conduct inspections when there are no other alternatives. We plan to minimize travel for inspections by leveraging nearby staff across business lines and using delegated inspections in certain cases. Travel for customer meetings is considered non-essential, and we are encouraging alternatives, such as video or teleconferences.

  Looking Forward

  While the current volatility is unprecedented, we’re confident that by maintaining a steady course and working in close partnership with all of you, we will navigate these challenges. And regardless of the market turbulence going forward, we will be open for business, holding spreads, quoting all deals and serving our mission.

• March 6Maintaining Business While Limiting Non-Essential Travel
  property, inspection, inspections, property inspections, underwrite

  

  To All Optigo Lenders

  Freddie Mac recently suspended all non-essential business travel for a period of 60 days, through Sunday, May 3, or until further notice. This precautionary measure will limit Freddie Mac Multifamily staff business travel to property inspections that are viewed as essential.

  For customer meetings that would typically involve travel, we are encouraging our staff and customers to consider alternatives, such as video- or teleconferences.

  For property inspections, we plan to minimize the need for travel by leveraging nearby staff and using delegated inspections in certain cases.

  As always, the safety of our staff and customers is our utmost concern, and we will continue to take appropriate steps to help protect their safety while preserving the continuity of our business and market liquidity.

  We continue to quote, underwrite and service deals to serve the financing needs of our customers, and appreciate your flexibility and support.

• February 28Production & Sales Update
  treasury, deals, quotes, quote, quoted, floors, treasury floors, spread, lock, index lock, under app, certainty, execution

  

  To All Optigo Lenders

  The 10-yr Treasury continues to drop to new lows, with coronavirus concerns hitting the financial markets and demand increasing for the relative safety and positive yield U.S. debt offers.

  Not surprisingly, we’ve been fielding questions from many of you about how this volatility impacts your deals. Our overall approach is the same as what you’re used to seeing from us – steady and calm. We’ve been through exceptional fluctuations before and will continue to monitor the market and take a measured response as needed.

  Quoted Deals

  Treasury floors were set in place to protect against times of extreme volatility, such as this, and they are crucial in allowing us to continue offering our 60-day spread hold. This is where the value of our Index Lock really shines – we can lock a deal now and guarantee your spread throughout the hold period. The volatility in the market will likely continue, and our lock offers needed certainty. Upon quote expiration, updates or revisions will reflect the current pricing environment.

  Deals Under App

  If you’re under app with us, stay the course. Floors are held throughout the application process, as are spreads. We hold spreads for 60 days and pride ourselves on our certainty of execution. And we look for the same certainty of execution from our Optigo® lenders.

  We understand that folks are uncomfortable with the current volatility of the market – but we’ve been here before. We’re confident in our ability to weather the ups and downs, and we’re also confident in our partnership with all of you as we work together.