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Multifamily Securitization Overview - mf.freddiemac.com

Multifamily Securitization OverviewAs of March 31, 20212 Multifamily Securitization Freddie MacTable of ContentsMultifamily Business Market , Sales and Risk Distribution Multifamily I: Recent Transaction II: Multifamily Team ..31017244749515868 Please visit our COVID-19page for the latest business updates on our coronavirus response. 3 Multifamily Business Overview4 Multifamily Securitization Freddie MacFreddie Mac Multifamily Business Key FactsThe Freddie Mac Multifamily Line of Business helps to ensure an ample supply of affordable rental housing by purchasing mortgages secured by apartment buildings with five or more unitsFreddie Mac buys loans from our network of Optigo lenders with over 150 branches nationwide, substantial lending experience and established performance recordsFreddie Mac follows aprior-approval underwriting approach and completes the underwriting and creditreviews of all Multifamily mortgages in-houseFreddie Mac s core mission is to provide liquidity, stability and affordability to the housing marketMultifamily employs about 1,000 experienced professionals at its headquarters.

excluding REOs), American Council of Life Insurers (ACLI) Quarterly Investment Bulletin and FDIC Quarterly Banking Profile Our disciplined credit practices are one of the main drivers of the continued strong performance of our offerings 0 10 20 30 40 50 60 70 80 90 S GSE Delinquency Rates

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Transcription of Multifamily Securitization Overview - mf.freddiemac.com

1 Multifamily Securitization OverviewAs of March 31, 20212 Multifamily Securitization Freddie MacTable of ContentsMultifamily Business Market , Sales and Risk Distribution Multifamily I: Recent Transaction II: Multifamily Team ..31017244749515868 Please visit our COVID-19page for the latest business updates on our coronavirus response. 3 Multifamily Business Overview4 Multifamily Securitization Freddie MacFreddie Mac Multifamily Business Key FactsThe Freddie Mac Multifamily Line of Business helps to ensure an ample supply of affordable rental housing by purchasing mortgages secured by apartment buildings with five or more unitsFreddie Mac buys loans from our network of Optigo lenders with over 150 branches nationwide, substantial lending experience and established performance recordsFreddie Mac follows aprior-approval underwriting approach and completes the underwriting and creditreviews of all Multifamily mortgages in-houseFreddie Mac s core mission is to provide liquidity, stability and affordability to the housing marketMultifamily employs about 1,000 experienced professionals at its headquarters.

2 Four regional offices and nine field officesFreddie Mac has provided $777 billion in financing for about 97,000 Multifamily properties since 1993, representing over million apartment unitsFreddie Mac s Multifamily mortgage portfolio of $394 billion comprises $359 billion of securitized mortgage loans, nearly $25 billion of unsecuritized mortgage loans, and $10 billion of other mortgage-related guarantees5 Multifamily Securitization Freddie MacFreddie Mac Multifamily Business 1Q21 ReviewFreddie Mac Multifamily new business activity was $14 billion in 1Q21 and provided financing for over 1,000 Multifamily properties, representing more than 134,000 rental units* Does not include LIHTC New Business Activity*(based on # of loans)RefinancesAcquisitionsOther12%88%1 Q21 New Business Activity*(based on UPB)Held-For-Investment LoansHeld-For-Sale Loans6 Multifamily Securitization Freddie MacNew Business Activity We continue to support the needs of the rental housing market across communities nationwidePerformance ($ Billions)20201Q201Q21 New Business ActivityTotal New Business Activity$ $ $ ProductsTargeted Affordable Housing (TAH)$ $ $ Balance Loans (SBL)$ $ $ Housing Communities (MHC)$ $ $ Housing$ $ $ Housing$ $ $ Investments$ ~$ $ Securitization Freddie MacFreddie Mac Multifamily New Business ActivityWe provide financing in all multifamilymarkets.

3 Our volumes have grown in line with the overall market New Business Activity ($ Billions)8 Multifamily Securitization Freddie MacFreddie Mac Multifamily Business ResultsWe maintain strong credit and capital management discipline and generate solid returnsKey Metrics 20201Q201Q21 New Business Activity (includes LIHTC Investments)$ billion$ billion$ billionMission-Driven UPB Generally Affordable at 80% Area Median IncomeN/AN/A~65%Mission-Driven UPB Affordable at 60% Area Median IncomeN/AN/A~32%Units Financed~803,000 units~111,000 units~134,000 unitsTotal Securitization Volume$ billion $ billion$ billionComprehensive Income (Loss), Net of Taxes$ billion($174) million$968 millionMortgage Portfolio$388 billion$342 billion$394 billionCredit Losses$1 million$0 million$0 million60+ Day Delinquency Rate16 bps8 bps17 bpsREO Inventory NoneNoneNone9 Multifamily Securitization Freddie Mac1766148102601002003004005006007008009 001,0001,1001,2001,300 BASIS POINTSD elinquency RatesFREDDIE MAC (60+ DAY)FANNIE MAE (60+ DAY)MF CMBS MARKET (60+ DAY)ACLI (60+ DAY) fdic Insured InstitutionsMultifamily Delinquency RatesOur disciplined credit practices are one of the main drivers of the continued strong performance of our offeringsNotes: Freddie Mac does not report forbearance loans in delinquency rates if the borrowers are in compliance with the forbearance agreement.

4 Fannie Mae s delinquency rate includes loans that received a : Freddie Mac, Fannie Mae, American Council of Life Insurers (ACLI) quarterly Investment Bulletin, fdic quarterly BankingProfile, TREPP (CMBS Multifamily 60+ delinquency rate, excluding REOs) for periods prior to 3Q17, Wells Fargo CMBS research for 4Q17-current CMBS delinquency rates. Current delinquency rates for ACLI and fdic are not yet POINTSGSE Delinquency RatesFREDDIE MAC (60+ DAY)FANNIE MAE (60+ DAY)10 Multifamily Market Overview11 Multifamily Securitization Freddie MacRental Households and Homeownership* Through 1Q 2021 Sources: Census Bureau, Current Population Survey/Housing Vacancy Survey, Freddie MacThe homeownership rate continues to trend toward pre-pandemic levels, coming in at as of the first quarter of 2021. In the second quarter of 2020, the homeownership rate surged to before steadily receding in subsequent RateHouseholds (millions)Owner and Renter Households and Homeownership Rate (1990 1Q 2021)Owner OccupiedRenter OccupiedHomeownership Rate12 Multifamily Securitization Freddie MacSource: ReisMultifamily FundamentalsThe COVID-19 pandemic has caused turbulence in the Multifamily market, but the recovery is already underway.

5 Reis predicts that the vacancy rate has topped out at and that positive rent growth will return in Rate and Change in Effective Rent (as of 1Q21) Change in Effective RentVacancy Rate13 Multifamily Securitization Freddie MacMultifamily SupplyThe number of permits increased markedly in the first quarter of 2021 to the highest annualized rate since the second quarter of 2015. Starts also increased which implies that there will be higher completion volume in the near future.* Through 1Q 2021 Sources: Moody s Analytics and Census BureauNotes: Starts and completions based on all areas of the , while permits are only for areas that require a building or zoningpermit. Moody s Analytics estimated that in 2000, 95% of the population was living in a permit issuing *Renter Occupied Households (millions)MF Permits, Starts and Completions (thousands) Multifamily Permits, Starts and Completions (5+ Units) and Renter HouseholdsMF PermitsMF StartsMF CompletionsRenter Occupied14 Multifamily Securitization Freddie MacTotal housing completions are now in line with the long-run average after lagging behind for more than a decade.

6 However, the completions to households ratio is still below the long-run average. Source: Moody s AnalyticsHousing ,0001,5002,0002,500 Ratio of Completions to HouseholdsHousing CompletionsHousing Completions to Total Households (SF & MF)TOTAL HOUSING COMPLETIONSLONG-RUN AVERAGE COMPLETIONSCOMPLETIONS TO HOUSEHOLDSLONG-RUN AVERAGE COMPLETIONS TO HOUSEHOLDS15 Multifamily Securitization Freddie MacTreasury rates dropped sharply during the COVID-19 pandemic which led to cap rate spread widening, since a similar drop was not observed for cap rates. However, the spread has moderately compressed in the past two : Moody s REAL Commercial Property Price Index (CPPI) and Real Capital Analytics (RCA) Multifamily Cap Rates and VALUE INDEXTREASURY, SPREAD AND CAP RATECap Rate Spread(left)Treasury Rate(left)MF Value Index (Right)16 Multifamily Securitization Freddie MacMultifamily Mortgage OriginationsSources: Freddie Mac 10-Ks, 10-Qs, FHFA Report to Congress, and Freddie Mac's internal reports, Fannie Mae 10-Ks, 10-Qs, FHFA Report to Congress, and Fannie Mae's Multifamily Monthly New Business Volumes, ACLI, Wells Fargo Securities LLC, Intex Solutions Inc.

7 , Mortgage Bankers Association and Freddie Mac internal researchOriginations have risen over the last several years, reflecting solid market fundamentals$250 $269 $285 $339 $364 $365 $413 $- $50 $100 $150 $200 $250 $300 $350 $400 $450 Multifamily Mortgage Originations ($ Billions)OtherCMBSF annie MaeFreddie MacLife Insurers17 Production, Sales and Underwriting18 Multifamily Securitization Freddie MacFreddie Mac buys loans from a network of approved Multifamily lenders who have over 150 branches nationwide, substantial experience and established performance recordsOur OptigoLender Network Arbor Agency Lending LLC Barings Multifamily Capital LLC Bellwether Enterprise Real Estate Capital LLC Berkadia Commercial Mortgage LLC Capital One CBRE Capital Markets CPC Mortgage Company LLC GrandbridgeReal Estate Capital LLC Greystone Servicing Company JLL Real Estate Capital.

8 LLC KeyBank NA LumentCapital M&T Realty Capital Corporation Newmark Knight Frank NorthMarqCapital PGIM Real Estate PNC Real Estate - Multifamily Sabal Capital Partners LLC Walker & Dunlop LLC Wells Fargo Multifamily CapitalOptigoLendersThe small size of the network promotes quality originations and a high level of service to borrowersOur lenders must comply with our standards for both origination and servicing of Multifamily loans, which includes meeting minimum financial requirements and undergoing satisfactory annual audits19 Multifamily Securitization Freddie MacThe Multifamily Production and Underwriting teams are situated throughout the country to promote market expertise and provide better customer serviceProduction, Sales & Underwriting Locations Western Region444 S Flower St44th FloorLos Angeles, CA 90071213-337-4284 Central Region71 S Wacker Dr10thFloorChicago, IL 60606312-407-7411 Southeast Region4501 N Fairfax DrSuite 400 Arlington, VA 22203703-719-2278 Northeast Region200 Park Ave16th FloorNew York, NY 10166212-418-8912 FIELD OFFICE LOCATIONSA tlanta, GA | Austin, TX | Dallas, TX | Denver, CO | Fort Lauderdale, FL | Houston, TX | Irvine, CA | Seattle,WA| Tampa, FLRegional focus means we have presence, experience and knowledge of local markets20 Multifamily Securitization Freddie MacFinancing Affordable Units97% of the eligible units we financed in Q1 2021 were affordable to households earning at or below 120% of the area median income (AMI)The numbers above represent the percentage of affordable units at each AMI threshold.

9 Totals may not add to 100% due to rounding. Additionally, FHFA mandated exclusions (MHC, supplementals, etc.) are Funded Units by AMI2014 -March 31, 20210-50% AMI>50%-60% AMI>60%-80% AMI>80%-100% AMI>100%-120% AMI>120% AMI21 Multifamily Securitization Freddie MacOur Credit PhilosophyOur credit policy and consistent underwriting practices are one of the main drivers of the strong performance of Freddie Mac Multifamily offerings performanceFreddie Mac makes all credit, structuring and pricing decisions working with our lenders during all aspects of the mortgage production process We are focused on: Sustainable cash flow Market knowledge & fundamentals Equity Definable exit strategy Sponsorship Quality real estate collateralUnderwriting teams are situated throughout the country to provide market expertiseProduction sizes, structures and submits loan for pricing Production obtains any necessary underwriting approvals to quote and issue quote to OptigolenderIf the quote is accepted, borrower completes loan application and Optigolender submits underwriting packageUnderwriting completes due diligence process.

10 Reports findings in investment briefUnderwriting recommends loan for approvalLoan is APPROVEDRate-locked and fundedSTARTL ender submits loan request to ProductionOur Credit Approval Process22 Multifamily Securitization Freddie MacK-Deal Mortgage GuidelinesThe following are the general guidelines for Freddie Mac s Multifamily mortgage purchases that are intended for K-Deal Securitization (subject to certain exceptions):PropertyType Origination requirements are focused on loans secured by occupied, stabilized and completed Multifamily properties Limited amount of seniors housing, student housing, cooperative housing, manufactured housing and Section 8 HAP contractsLoanTerms Mortgages are fixed rate or floating rate 5-, 7-, 10-, 12-and 15-year loan terms with a maximum amortization of 30 years May contain initial interest-only periods Moderate exposure to full-term interest-only loans Full-term interest-only loans require higher initial amortizing debt service coverage ratio (DSCR) and lower loan-to-value (LTV) ratio Floating-rate mortgages quoted beginning on September 1, 2020 are based on 30-day Average SOFR, generally require a third-party SOFR cap and are sized using an equivalent fixed rateBorrowers Single purpose entity (SPE)


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