Affordable Housing Building

Freddie Mac Tax Exempt Bond Securitization


The TEBS product is a structure in which a Sponsor transfers privately placed tax-exempt multifamily housing revenue bonds (and possibly related taxable bonds or loans) to FHLMC in exchange for FHLMC senior Class-A M certificates that are sold to investors and Subordinate Class-B M Certificates that are retained by the Sponsor.


Tax-Exempt Bond Securitization (TEBS)
Description

The TEBS structure is a proprietary execution offered by Freddie Mac through which a Sponsor transfers privately placed tax-exempt multifamily housing revenue bonds (and possibly related taxable bonds or loans) to Freddie Mac in exchange for Freddie Mac senior Class-A M Certificates that are sold to investors andSubordinate Class-B M Certificates that are retained by the Sponsor

Freddie Mac’s Class-A M Certificates are fully guaranteed tax-exempt or taxable securities supported by pools of unenhanced tax-exempt multifamily housing revenue bonds or related taxable bonds or loans. In the event that the senior Class-A M Certificates bear interest at a variable rate, Freddie Mac may also provide a liquidity facility in the form of a guarantee of the purchase price of the senior certificates if tendered for purchase by an investor

Benefits
  • Off-balance-sheet option with portfolios of unenhanced multifamily bonds
  • Enhanced yields through Class-B M Certificates
  • Reduction of risk with risk capped at subordination level of the Class-B M Certificates
Minimum Pool Size Generally $100 million
Subordination Level (Size of B Piece) On average 15% of total pool size, but can vary based on collateral quality and Sponsor needs
Eligible Sponsors Freddie Mac Targeted Affordable Housing Seller/Servicers and other well-capitalized financial institutions on a case-by-case basis
Eligible Properties Multifamily properties
Minimum DSCR DSCR Calculator 1.05
Max LTV (For Each Asset) 95%
Liquidity Facility Options In the event that the senior Class-A M Certificates bear interest at a variable rate, Freddie Mac may also provide a liquidity facility; several options exist, depending upon Sponsor preference
Hedging If the Class-A M Certificates are variable-rate certificates, the Sponsor must purchase an interest rate hedge from an approved Freddie Mac counterparty

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