Freddie Mac Multifamily introduced the KF series of floating-rate K-Deals to our securitization platform in October 2012. This offering provides borrowers with the ability to obtain financing indexed to lower, short-term rates along with more prepayment flexibility. Through November 2019, Freddie Mac has funded and securitized over 3,700 floating-rate loans totaling over $84 billion of original unpaid principal balance.

Unlike our standard, fixed-rate K-Deal, where loans have a lockout period followed by defeasance, our floating-rate securitizations provide borrowers with more flexible prepayment options. The majority of borrowers opt for a lockout period followed by a 1% prepayment premium on the outstanding balance of the loan. Other options include step-down prepayment premiums where each year the prepayment premium decreases (typically starting at 3% for the first year, 2% the second year and 1% starting in the third year through maturity).

In this report, we leverage our own data and focus on the voluntary prepayment activity of our floating-rate K-Deals over a 12-month period ending in November 2019. We look at prepayment speeds, lockout periods, seasoning and find that prepayments are generally highest when prepayment premiums are lowest and among the older vintages. Read the report.