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September 01, 2016

Targeted Affordable Housing Update

David Leopold
Article By
David Leopold, VP Targeted Affordable Sales & Investments*

We were pleased to share all the new things happening in Targeted Affordable Housing with so many of our Seller/Servicers on last week’s call.

Our upward trend continues: we’re growing in volume, improving our products and creating new offerings to meet the needs of borrowers and renters across the nation. On behalf of our entire team, I’d like to thank all our customers: we know that our success in large part is due to our partnership with all of you. If you missed the call as your summer wrapped up, I hope you’ll take the opportunity to listen to it here.

We’re looking forward to seeing you in Miami October 17-19 at Multifamily’s annual conference. We’ll highlight innovation, products and trends—and hear your feedback, which we find invaluable. And along the way, we’ll have some fun!

Here are some highlights of our year so far:

A breakout year

We’re approaching $2.5 billion in production as of the end of July and expect another record year. Driving this growth is our continued investment in the platform and product innovation.

New and improved products

We’re not resting on our laurels. With your help, we’re finding better ways to provide flexibility and deliver more efficient financing for affordable housing opportunities.

Tax-Exempt Loans success story

TEL has grown tremendously since we launched in Spring 2014. Our committed pipeline includes 27 states plus D.C. (Maryland is the latest) with 161 loans totaling $2.4 billion. This product is important to the tax credit industry: it’s the most cost-effective execution for 4% tax credit transactions.

What sets TEL apart?

In addition to the efficiencies of the direct placement execution, TEL provides unrivalled flexibility to meet all market needs. We offer variable rate loans as well as forwards, allowing you to customize the product for each transaction.  Also, no institution does more to help borrowers manage interest rate risk: we will lock a spread for 90 days before closing and forward commit for as long as 36 months. So it’s a great fit for new construction or substantial rehabilitation.

Judging by the numbers, it’s working. TEL year-to-date growth is more than 300%. Forwards are popular, making up 70% of our year-to-date TEL applications.

The new Flex TEL

As evidence of our ongoing investment in innovation, we just introduced Flex TEL, making TEL even more flexible. It’s a great option for borrowers who need more cash flow to rehab an affordable property. Flex TEL is a floating-rate loan for up to three years which converts to a fixed rate that is locked at closing. It provides lower debt service and higher cash flow during renovation, without changing the size of the loan.

Introducing Green Advantage

We’re excited about our new suite of green financing offerings which work with any Freddie Mac loan. With Green Advantage, we’re making a difference for borrowers, renters and the environment.

What is the Green Advantage benefit?

It’s cheaper and easier to use than what’s in the market. We reimburse the cost of a green assessment (up to $3500) to help borrowers identify how they can improve their properties to save water or energy. When borrowers commit to making these improvements (and can save 15% in energy or water usage), they can get a Green Up or Green Up Plus loan—which means we’ll underwrite to 50% or 75% of the projected owner paid savings respectively. Further, these loans would be uncapped, which may mean lower pricing. So, the borrower gets improved cash flow, more proceeds and better pricing. 

And unlike the competition, we give borrowers up to two years to make the necessary property improvements.

Since we launched just a few weeks ago, we’ve already priced more than $1 billion in Green Up loans and funded more than $200 million.

We have tremendous momentum and are excited about what’s to come—including our Customer Conference in Miami this October. Join us there for sessions on Preservation Rehab, TEL innovations, underwriting moderate rehab, Green Advantage, and a whole lot more.

Enjoy the end of your summer, and we look forward to seeing you soon in Miami!

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