Leaning into Multi PCs®
With our diversified set of high-grade securities, we have a multitude of options when considering how to best transfer risk on a Multifamily loan. To make these decisions, we thoughtfully consider the nuances of each deal, including the economics, loan terms and aggregation period.
You may have noticed we’ve been sending more loans through the Multi PC® execution path recently, so I’d like to talk a bit about our Multi PC program and why you’re seeing more of these issuances.
One of our foundational securities, we first introduced Multi PCs in the early 1980s and revamped them in 2014 to fit modern needs. Currently, all our issuances are 55-day PCs — and as of September 2022, we have issued $7.4 billion in volume year to date.
An Attractive Alternative
Multi PCs are pass-through certificates, are fully guaranteed by Freddie Mac, and close based on corporate settle (T+3) with Freddie Mac, which minimizes forward settle risk. This execution allows investors to target specific needs and are an attractive alternative to our K-Deal® and SB-Deal® securities.
You’ll see loan programs like longer-term duration (i.e., 12 year or above), flexible prepay, short durations (i.e., 5 year), low-leverage low-loan spread and Targeted Affordable Housing, including Tax-Exempt Loans, frequently utilizing PCs. Investors looking for longer duration securities may purchase them through PCs since our K-Deal program now revolves predominately around 7- and 10-year durations. We’ve also developed additional, complementary PC products, like the PC REMIC and PC Swap, that offer more flexibility in investing options.
We recognize that investors want to provide support for various impact goals, which is why we introduced our Impact Bonds. Multi PCs have been an ideal execution path for our Impact Bonds, specifically loans that fit under our Social Bonds Framework.
On the front end, the same underwriting standards are applied to loans intended for Multi PCs or K-Deals. The credit team is unaware of the execution path on the backend at the time of underwriting, resulting in consistent underwriting standards across all our executions. With our best-in-class Servicing Standard, you can feel confident the assets are performing and compliant.
Innovative Risk Transfer
Transferring the credit risk on our fully guaranteed securities is a key component of our risk management framework, which allows us to successfully carry out our mission of providing stability and liquidity to the market.
We have two back-end credit risk transfer (CRT) programs through which to transfer the credit risk on a reference pool of loans underlying fully guaranteed securities. Freddie Mac introduced the Multifamily Structured Credit Risk Notes (MSCR) in May 2016 and the Multifamily Credit Insurance Pool (MCIP) in May 2018. Both CRT vehicles are innovative ways to attract different sources of capital based on investor or market needs.
As of September 2022, we have issued 11 CRT transactions for a total of $1.5 billion, with a total reference pool of over $28.0 billion. We expect to issue one more companion (MSCR/MCIP) deal this year.
Steady in Our Executions
The K-Deal program continues to be our flagship offering. We are balancing liquidity and consistency when we determine which execution path to send loans. You can expect to see continued growth in the Multi PC program, with deals announced monthly.
Our platform is strong because of the partnership we have with our investors, and we’re committed to targeting the needs of all parties through all economic cycles.
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