Scotsman Guide - February 2009 Commercial Edition

Freddie Mac

By Darrick Meneken

Michael C. May oversees Freddie Mac’s multifamily business, which had a record year in 2008 with more than $23 billion in settlement volume — despite the onset of U.S. conservatorship. A few years ago, the former government-sponsored enterprise’s unwillingness to take on multifamily business with cheap credit caused some head-scratching. Now Freddie Mac has its choice of deals. Here’s what May sees for commercial brokers and for Freddie Mac’s future.

Freddie Mac didn’t cash in on some of the higher-risk multifamily lending that others enjoyed at the height of the boom. Why not? Wall Street had gone well beyond what we could do, and we were prepared to let the business go. We want to avoid competing on credit and price. We don’t think that’s a winning formula. We’d much rather create additional value that people want. Customer service is a big focus for us.

Have there been many changes to Freddie Mac’s multifamily business since U.S. conservatorship began? There were no changes in terms of our support for the multifamily market. During the 10 weeks before conservatorship, we settled $4.9 billion in multifamily business. In the 10 weeks following conservatorship, we settled $4.1 billion. We did pretty much all the business that was out there to do that we liked.

What types of multifamily properties does Freddie Mac work with now? We do student housing, age-restricted and senior housing — just as long as there’s not a big medical component — and some military housing.

What traits do your multifamily borrowers have in common? We like people to have skin in the game. We want equity in front of us. Sponsorship is critical. Ultimately, we’re looking for experience, good sponsorship, cash in the deal and properties with strong cash flow in strong markets.

How can commercial mortgage brokers find success with Freddie Mac? Brokers need to make sure they understand the needs of the lenders within our Program Plus network. Brokers should build a relationship with those lenders. When members of that network find transactions that fit our box, they’ll put together a preliminary deal package, and we’ll talk it through with them. Ultimately, the deal closes, and we’re committed to buy that loan.

We’re also very flexible after the sale. We’re perfectly comfortable with allowing the property to be worked while we’re financing it, even though that wasn’t the original deal. The only thing that we want to make sure of is that there’s sufficient collateral to protect our loan. If there is, we work with borrowers to execute their strategy in the least costly way.

What’s next for Freddie Mac’s multifamily strategy? There’s no plan to change. Everyone says the same thing: Office is down, retail is down, hotels are down, but multifamily is hanging in there. I think that’s because of the liquidity that we help provide. We’re certainly not immune from the realities of the market, but we’re going to come out in better shape than many who were chasing business with credit and price.

Darrick Meneken is an associate editor at Scotsman Guide. Reach him at (800) 297-6061 or darrick@scotsmanguide.com.

Next Month

… in March’s Scotsman Guide

■ Inside North Carolina’s Research
Triangle
■ Creative ways your borrowers can
free up funds
■ How to work with smaller lenders
■ Why it’s possible to negotiate a
buydown

… and much more.

Online? Check out current and past editions of Scotsman Guide at scotsmanguide.com.

5 Years Ago
From February 2004’s Scotsman Guide

“Keeping your employees coming back to their desks every day can have an immediate impact on your bottom line. In the mortgage industry, where five years with the same company is almost unheard of … controlling turnover translates into big money.”

 MONICA CROW THER, Fieldstone Mortgage Co.

“The Challenge of Employee Retention” scotsmanguide.com/0960

View this article and others in our free article archive at scotsmanguide.com.

Name TD Bank Project Annual summer reading program

Helping Hands
Each month, Helping Hands features a
mortgage professional or group that has
volunteered to lend a hand to others in need
By Ivanna C. Sukkar

Sites Maine, Vermont, Connecticut, New York, Pennsylvania, New Jersey, Delaware, Florida and Washington, D.C.

How This past April, TD Bank kicked off its annual summer reading program during National Library Week. The bank donated $4,000 and one book each to 50 public libraries in low- to moderate-income areas in eight states that it serves and in the Washington, D.C., metropolitan area, says Jennifer Kastle, TD Bank’s assistant vice president of community relations and community-relations manager.

Diana Chapan (left), executive director of the Queens Library Foundation, and Lorna Rudder-Kikkeny (right), Queens Library director, accept a book donation from TD Bank Vice President Jack Rainey (second from left) and Retail Market Manager Christine Modafferi during National Library Week this past April. Photo: TD Bank.

The summer reading program started in 2003, Kastle says. Through the program, the bank deposited $10 in new or existing bank accounts for children who read 10 books during the summer.

Children participated in the program by picking up a brochure at their local banks and listing the 10 books they read.

Why Kastle says that the bank started the program because “education has always been important to us.”

The program allowed the bank to educate children in its communities by combining the goals of encouraging them to keep up their reading skills during their summer vacations and teaching them the importance of saving money, Kastle adds.