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May 08, 2019

Empowering Small Financial Institutions to Fund More Affordable Housing

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

We’re fueling financing for affordable rental homes – through a new effort that helps small financial institutions access additional liquidity to drive more capital for quality, affordable housing. Our Private Placement PC Swap Execution is a tool we’ve created to tackle the nation’s most critical housing challenges in underserved markets.

On April 25 we closed our first transaction with San Francisco-based IMPACT Community Capital, a leading impact investment manager investing in underserved communities.

Here’s how it worked: IMPACT sold Freddie Mac Multifamily 77 loans, all with low-income tax credits, totaling more than $141 million. In exchange, we provided them with 77 Participation Certificates (PCs) which are more liquid. We guarantee 100 percent of the principal and interest on these PCs, which can be held or sold to investors. Because of this conversion to securities, IMPACT is then able to make more affordable housing loans in the future – to support families across the nation struggling to find a decent home they can afford.

Theses IMPACT loans finance rental properties in 29 states that serve low- to very low-income residents. Of the roughly 5,800 rental units, about 3,400 are home to people with very low incomes who make 50 percent or less of the area median income. These newer properties – the average year built is 2010 – are in good to excellent condition and are financed by 9% Low-Income Housing Tax Credit loans.

This is a unique way to support liquidity at financial institutions that provide much needed capital for affordable housing. It’s all part of our commitment to innovation, to finding new ways of making home possible and strengthening our communities.

As the top funder of affordable housing in the U.S., we innovate to serve the needs of the market – and work to tackle the nation’s most persistent housing challenges.

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