Innovative Risk Transfer
At Freddie Mac Multifamily, the future of housing finance is today.
We realized back in 2006 that the best way to fulfill our mission and increase access to multifamily funding is to shift as much risk away from taxpayers as possible, transferring it to private investors. Securitization is our primary method of doing this. It involves gathering loans we buy into pools, securitizing them and selling the resulting certificates to investors.
Benefits of our approach:
- Attracts private capital through repeatable, sustainable structures
- Transfers the vast majority of risk to private investors, away from taxpayers
- Allows us to offer lenders and borrowers access to a highly competitive funding source for multifamily mortgages
- Expands Freddie Mac Mulitfamily's access to capital, while helping to manage our risk
- Reduces reliance on Freddie Mac’s government guarantee, thereby shrinking the government's footprint in the housing finance market
We issued our first modern K-Deal® — our flagship execution type — in June 2009. In just a few years, we went from holding nearly all of the mortgages that we purchase to securitizing most of our eligible purchase volume.
Today, we securitize about 90% of our purchase volume each year, which greatly reduces our reliance on our retained portfolio and government backstop guarantee.
We’ve incurred zero credit losses on our K-Deal and SB-Deal® guarantees to date.
Importantly, most of our risk transfer executions are considered “true sales” — after securitization, the underlying loans come off of our balance sheet. As a result, we are not and would not be required to hold significant capital against such exposures. This allows us, in effect, to recycle our capital — to reuse the funds from the sale to buy new mortgage loans.
We constantly strive to develop innovative ways to drive private capital up and move risk out on every loan we buy. Over time, our credit risk transfer program has evolved to encompass a wide and growing range of our loan types. Expanding our program has enabled us to expand our support for rental housing that’s affordable to most renters, including those with low and moderate incomes.
We continue to enhance and expand our array of risk transfer transactions and to work in partnership with our customers to create a better, stronger future.
To read more, see our Multifamily Securitization Overview.