Targeted Affordable Housing:
Tapping into Tax-Exempt Financing
NCSHA 2016
David Leopold, Vice President, Targeted Affordable Sales & Investments
Tax-Exempt Loan
 No longer new execution for 4% LIHTC, over $1 billion
committed
 Documented as a loan instead of a bond
 Private placement structure with back to back funding
 Credit parameters same as our traditional bond credit
enhancement:
1.15 DCR / 90% LTV
 Terms up to 18 years
 Immediate funding and forward commitments executions
available
 Both fixed and floating rates available
AHF Live 2015
2
Freddie Mac
2
Side-by-Side Comparison: Tax-Exempt Bond
Placement and Direct Placement of Tax-Exempt
Loan
Tax-Exempt Bond Placement
Direct Placement of Tax-Exempt Loan
Government Lender Note
(payable solely from “Borrower Note”)
(Governed by “Funding Loan Agreement”)
Tax Exempt Bonds
(payable solely from
“Borrower Note”)
Bond Purchaser
$
Government Entity
as Issuer
Purchase Price
(pursuant to “Bond
Purchase Agreement”)
Loan to
Borrower
(pursuant to
“Loan
Agreement”)
$
Borrower
Note
Funding Lender
Governmental
Lender
$
Funding Loan
to City as
“Governmental
Lender”
Loan to
Borrower
(pursuant to
“Loan
Agreement”)
Borrower
AHF Live 2015
$
Borrower
Note
Borrower
3
Freddie Mac
3
Tax-Exempt Loan
 Freddie Mac is bringing capital market strength to
4% LIHTC financing through securitization.
 Aggressive rates and significant cost savings
compared to traditional publically offered bond
credit enhancements
 Less documentation
 More efficient execution
AHF Live 2015
4
Freddie Mac
4
Bond Products Comparison Chart
Tax-Exempt Loan
Credit Enhancement
for Direct Placement
Bonds
• More efficient, more
cost effective
alternative to
publically offered taxexempt bond credit
enhancement
• Private placement
loan product with
fewer documents
and participants
• Immediate and
Forward Executions
available
• Fixed and Variable
rate executions
available
• Min. 1.15 DCR
• Max. 90% LTV
• Terms up to 18 years
• Max amortization of
35 years
• Minimum 10 years
prepayment
protection
• More efficient, more
cost effective
alternative to
publically offered taxexempt bond credit
enhancement
• Private placement
bond product with
fewer documents
and participants
• Immediate and
Forward Executions
available
• Fixed and Variable
rate executions
available
• Min. 1.15 DCR
• Max. 90% LTV
• Terms up to 15 years
• Max amortization of
35 years
• Minimum 7 years
prepayment
protection
AHF Live 2015
Cash Loan with Short
Term Bonds
• Cash loan, secured by
the property, that
provides collateral
for tax-exempt bonds
with 4% LIHTC
• Bonds paid off when
units placed in
service. Cash loan
remains in place.
• Cash loan coupled
with privately
placement bonds.
• Immediate and
Forward Executions
available
• Fixed and Variable
rate executions
available
• Min. 1.15 DCR
• Max. 90% LTV
• Terms up to 18 years
• Max amortization of
35 years
• Yield maintenance
followed by
defeasance
Bond Credit
Enhancement with 4%
LIHTC
• Traditional, publicly
offered bond credit
enhancement
• Public bond offering
with multiple
participants
• Immediate and
Forward Executions
available
• Fixed and Variable
rate executions
available
• Min. 1.15 DCR
• Max. 90% LTV
• Terms up to 35 years
• Max amortization of
35 years
• Fee Maintenance is
required
Bond Credit
Enhancement with
Other Affordability
Components
• New or replacement
credit facility for taxexempt housing
bonds
• Public offering or
private placement
bond executions
available.
• Immediate and
Forward Executions
available
• Fixed and Variable
rate executions
available
• Min. 1.25 DCR*
• Max. 85% LTV*
• Terms up to 30 years
• Max amortization of
30 years
• Fee Maintenance is
required
*Higher leverage may
be available in Tier 1
and Tier 2 Markets.
Freddie Mac
5
Bridge to Resyndication
 New efficient 24-month acquisition bridge for LIHTC eligible
property in anticipation of resyndication
 For experienced sponsors in markets with available bond cap
and predictable 4% LIHTC allocation process
 Max Sizing: 1.15 DCR, 85% LTV
 Floating rate, no hedge requirement
 Allows for rate lock of TEL or other Freddie Mac perm mortgage
to coincide with LIHTC closing
AHF Live 2015
Freddie Mac
6
David D. Leopold
Vice President, Affordable Sales &
Investments
Freddie Mac Multifamily
703-714-2655
David_Leopold@freddiemac.com
AHF Live 2015
Freddie Mac
7
Fannie Mae Multifamily
Affordable Housing
Presentation to NCSHA
January 13, 2015
© 2011 Fannie Mae. Trademarks of Fannie Mae.
© 2015 Fannie Mae. Trademarks of Fannie Mae.
1
Eclipsing the Competition

Experienced and Dedicated Affordable Team
• Fannie Mae has shown its commitment to affordable housing
by creating a team that focuses solely on affordable housing –
this team encompasses many business divisions including
credit, legal, product development and pricing
• A dedicated team allows for a consistent approach to the DUS
Lenders across the platform
• A dedicated team allows for a high level of calibration across
the team due to the geographic diversity of the team
• A team dedicated to addressing product developments as
market dynamics evolve
Single MBS Structure Delivers Unparalleled Flexibility
•Allows for increased flexibility to structure loans more
creatively.
•Since our loans do not have to “fit” into a large securitized
pool, the unique aspects of the transaction can be tailormade for each MBS issuance.
© 2015 Fannie Mae. Trademarks of Fannie Mae.
9
Eclipsing the Competition - Continued



DUS Lender Network Delivers Excellent Service
• Strong relationship management at origination through the lifeof-the-loan
• Since Lender controls the loan process, the deals can close
faster which translates to certainty, speed and ease of
execution
• Lender has delegation to underwrite transactions in accordance
with Fannie Mae guidelines
Risk Sharing Model Aligns Interests
 Risk Sharing means interests are aligned and drives strong
credit quality
Competitive Pricing and Terms Win Business
 Asset quality, financial strength of the sponsor and market
dynamics drive the approach
 Added consideration for deeper affordability, properties with
50 or less units and Green
© 2015 Fannie Mae. Trademarks of Fannie Mae.
10
Fannie Mae is Committed to
Affordable Multifamily
Миллионы
MAH Production
$4 000
$3 800
$3 000
$2 300
2011
$2 300
$2 600
$2 200
$2 000
Through
3Q only
$1 000
2012
2013
$In Billions
2011
2012
2013
2014
Total MF
$24
$34
$29
$29
MAH
$2.3
$3.8
$2.3
$2.6
2015 overall volume for all Multifamily is $42.3 billion
© 2015 Fannie Mae. Trademarks of Fannie Mae
11
Fannie Mae is in every market, every day
Fannie Mae MAH pursues business with recorded affordability restrictions
Very Low Income
<=50%AMI
Low Income <=60% AMI
80 – 20 Mixed Income
Fannie Mae offers the most flexibility with our single-asset security
Fixed and Floating Rate
Options
No minimum or maximum
loan size and terms 5-30
yrs.
Taxable and Tax-Exempt
Solutions
Fannie Mae offers the fastest and most reliable execution for all financing types
Acquisitions and
Refinance
Moderate and Substantial
Rehab
Preservation
© 2015 Fannie Mae. Trademarks of Fannie Mae.
12
Choose the Fannie Mae Tax Exempt Bond
Financing Solution that Works for You!
Fannie Mae offers very competitive pricing with the most
flexibility, as well as the fastest and most reliable execution.
© 2015 Fannie Mae. Trademarks of Fannie Mae
13
MBS as Tax Exempt Bond Collateral (M.TEB)
Obtain a lower interest rate and significant savings over the life of the loan
when combining the ease of our MBS execution with the benefit of tax
exempt bonds.
Benefits
•
Close faster with our unique delegated
model
•
Available for fixed-rate and variable-rate
bonds
•
20-25 bps better pricing than traditional
bond credit enhancement
•
Interest-only is available
•
Fannie Mae guaranteed direct pass through
of principal and interest is more attractive to
bond buyers
•
No minimum or maximum loan size
Competitive Advantage
• Loan terms up to 30 years
• Declining prepayment options OR yield
maintenance
• LTV’s up to 90%
• Available for taxable as well as tax-exempt bonds
• No master or special servicer with Life-of-loan
servicing
• Delegated underwriting model provides certainty
of execution
• Wide investor base offering attractive pricing due
to the appeal of the MBS
• The industry’s most experienced Affordable
Housing experts
© 2015 Fannie Mae. Trademarks of Fannie Mae
14
Inaugural Fannie Mae M.TEB Structure
•
$21,750,000 Illinois Housing Development
Authority – Fullerton Court Apartments
•
Development Type: Acq/Rehab
•
Closing Date: January 26, 2015
•
Bond Rating: Moody’s “Aaa”
•
Term: Single 16 year Bond Maturity
•
Bond Rate: 3.00%
•
Bond Security: Fannie Mae MBS
•
Underwriter: RBC Capital Markets
•
Investors: CRA Investors, Insurance
Companies and Money Managers
•
Redemption: “Yield Maintenance” 1st 10
years; Par Call Thereafter
•
Structure Savings:
• Estimated Savings of 25-30 BP over
traditional Fannie Mae Credit
Enhancement Structure
• Estimated Savings of 5 Basis Points over
Taxable Conventional Fannie Mae MBS
Source: RBC Capital Markets
© 2015 Fannie Mae. Trademarks of Fannie Mae
15
Flexible Application of M.TEB Structure
New Construction
Reduced Occupancy
Affordable Rehabilitation
(ROAR)
M.TEB – Variable Rate
with Structured ARM
Construction loan or letter of
credit required
No Construction loan needed;
rehab costs of up to $120,000
/unit
Term of 10 years (up to 18
years); LTV of 75%
Permanent bond pricing locked
at issuance
Minimum occupancy of 50% and
minimum DSC of 1.0% (interestonly)
Interest rate is established as
the applicable index of 1 or 3
month LIBOR plus the Margin
Monthly payment of interest
during construction phase
MBS Structure modified to
provide Fannie Mae direct credit
enhancement during rehab
period which will convert to MBS
upon completion of rehab
Interest Rate Cap Required for a
minimum of 5 years
Upon Conversion, MBS will be
delivered to the Trustee and
secure the Bonds
Increased leverage opportunities
when underwritten to asimproved rents
Varying Prepayment Options –
One year lock-out followed by
prepayment premiums starting
at 1-4%
During the Construction phase,
Borrower will pay debt service
on the bonds and construction
loan or letter of credit
Interest rate savings similar to
full MBS Tax Exempt Pass
Through Bond execution
© 2015 Fannie Mae. Trademarks of Fannie Mae
16
Index Bonds
Credit Enhancement of variable rate tax-exempt
Index Bonds or Floating Rate Notes (FRNs) with
no put option, liquidity support or remarketing costs.
Key Terms and Benefits
• 10-30 year terms
• Amortization up to 35 years
• LTV up to 85%
• Minimum DSCR of 1.00x at the
Marshall Field Garden
Apartments
2015 Illinois Housing Development Authority
– Variable Rate Issue
$102,000,000
Underwriting Rate
• Interest rate cap period – 5 years
• New money issues, refundings or credit
substitutions
10 year term
SIFMA Index + 100 bps
4% LIHTC – Acquisition & Rehab
© 2015 Fannie Mae. Trademarks of Fannie Mae
17
Index Bonds: Pricing Considerations
•
•
•
Pricing of Floating Rate Notes is structured as a “spread” to the SIFMA or LIBOR index
Pricing spreads change over time similar to the way credit spreads change
In the current environment, investors generally do not want maturities beyond seven years
• Current pricing is approximately SIFMA + 85-90 basis points in high demand states
and SIFMA + 90-100 basis points in other states
Large volume of
high net worth
investors or high
income taxes
=
Higher
Demand
Tighter
Spreads
High Demand States
New York
California
Connecticut
New Jersey
Maryland
Virginia
North
Carolina
Georgia
© 2015 Fannie Mae. Trademarks of Fannie Mae
18
Reduced Occupancy Affordable Rehab (ROAR)
Immediate, permanent financing for major rehab allowing tenant
displacement; no separate construction loan.
Benefits
• Interest-only payments during the renovation
period
• Proceeds are fully funded at closing
• Up to 90% of “as stabilized” LTV during the
rehab period
• During rehab:
• Minimum occupancy of 50%
• Minimum DSCR of 1.0x (interest-only
basis)
• Rehab costs up to $120,000 per unit
• Increased leverage opportunities when
underwritten to as-improved rents.
Competitive Advantage
• One loan solution for construction and permanent
financing
• Initial cash execution and our single asset security
allow for flexible loan terms and prepayment
structures that can be tailored for any transaction
• Competitive pricing and terms
• Experienced, dedicated affordable team partners
with you to provide expert solutions
© 2015 Fannie Mae. Trademarks of Fannie Mae
19
Reduced Occupancy Affordable Rehab (ROAR)
Key Terms
Terms
Eligible Properties
Stabilized MAH; rehab range
typically $40K-$120K/unit
Eligible Sponsors
Strong sponsors with demonstrated
tenant-in-place rehab track record
LTV
Up to 90% “as stabilized”
Term
5-30 years
Amortization
Up to 35 years
Rehab Period
12-18 months
Minimum Loan Size
$5 million
Loan Disbursement
Fully funded at closing; rehab funds
escrowed by Lender
© 2015 Fannie Mae. Trademarks of Fannie Mae
20
Tabaré Borbón
Customer Account Manager
Multifamily Affordable Housing
tabare_borbon@fanniemae.com
Visit the new Multifamily website today!
www.fanniemae.com/multifamily/index
© 2015 Fannie Mae. Trademarks of Fannie Mae.
21