Multifamily K Certificates Multifamily K Certificates are regularly-issued, structured pass-through securities backed by recently-originated multifamily mortgage loans. K-Deals feature a range of K Certificates Feature Loans with Various Terms ■■ K-000 Series backed by multifamily mortgages with various terms, but mostly 10-year terms. investor options, which include guaranteed senior and interest only classes. The related underlying private label ■■ K-500 Series for loans with five-year terms. trust includes unguaranteed mezzanine, subordinate and ■■ K-700 Series for loans with seven-year terms. interest only bonds. ■■ K-F00 Series for loans with floating rates. ■■ K-P00 Series for seasoned loans from the portfolio. ■■ K-S00 Series backed by multifamily mortgages on “ K Certificates provide investors with structured guaranteed securities that have both the structured credit enhancement and the Freddie Mac guarantee.” seniors housing properties ■■ K-ABC Series utilizes letters instead of numbers to designate single loan or single borrower securitizations, such as K-SCT for the financing of Starrett City, a very large multifamily property loan in New York. Benefits Multifamily K Certificates Can Provide ■■ Strong credit provided by the Freddie Mac guarantee plus the additional credit support of an underlying multifamily mortgage pool underwritten to Freddie Mac’s portfolio standards. ■■ Diversification through pooled risk of many assets versus single asset risk. Freddie Mac works diligently to manage the terms and ■■ credit quality of the underlying loans and the composition features of defeasance or yield maintenance. of the securities. In addition, there are strict prepayment restrictions on the underlying collateral which reduces the Call protection associated with the prepayment ■■ Rated bonds, including guaranteed senior bonds privately rated at securitization as AAA, without interest rate sensitivity of the K Certificates. taking into account the Freddie Mac guarantee; and non Freddie Mac-issued unguaranteed mezzanine bonds publicly rated at securitization and throughout the term. ■■ Transparency and consistency on collateral and deal information through the offering documents. ■■ Liquidity that is supported by repeatable and reliable issuance. ■■ Guarantee of timely payment of interest and ultimate payment of principal on the guaranteed certificates. Multifamily K Certificates General Structure ■■ ■■ Freddie Mac securitizes Multifamily loans via the K ■■ Freddie Mac purchases all the senior, guaranteed Certificate structure through the following steps: bonds issued by the third-party trust and securitizes First, the loans are sold to a third-party depositor the senior bonds via a Freddie Mac trust. who deposits the loans into a third-party trust. ■■ ■■ ■■ The resulting Freddie Mac guaranteed structured Then private label securities backed by the loans are pass-through certificates (“K Certificates”) are then issued by the third-party trust. publicly offered by Freddie Mac via placement agents. The subordinate bonds and mezzanine bonds, which are not guaranteed by Freddie Mac, are issued by the third-party trust and are privately offered to third-party investors. Loans deposited into the third-party trust by the depositor Freddie Mac acquires Guaranteed Bonds and deposits them into a Freddie Mac trust (1) Freddie Mac sells guaranteed K Certificates backed by the Guaranteed Bonds Investors Freddie Mac sells loans to a third-party depositor Unguaranteed Mezzanine Bonds Investors Unguaranteed Subordinate Bonds Investors (1) Guaranteed Bonds may include senior bonds and/or interest only bonds. For more information, email [email protected] or visit www.FreddieMac.com/mbs/html/product/kcerts.html 6/14
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