Adrian B. Corbiere, senior vice president of Freddie Mac’s Multifamily Division, spoke about that organization’s plans at the Real Estate Finance Association’s “Industry Leaders” session last week in Boston.
Getting more “mission-centric,” Freddie Mac will focus its attention on affordable housing this year. In Boston, where housing prices are high, rents continue to increase and workforce housing is hard to come by, one Freddie Mac executive assured local industry professionals that the government-sponsored enterprise will continue to support affordable housing initiatives.
Adrian B. Corbiere, senior vice president of Freddie Mac’s Multifamily Division, visited Boston last week to speak to bankers, lenders and realty companies as part of the Real Estate Finance Association’s “Industry Leaders” session. The event was held at the offices of law firm Wilmer Cutler Pickering Hale and Dorr at 60 State St. in downtown Boston.
In his position, Corbiere is responsible for the company’s $97 billion multifamily portfolio, which includes cash mortgage, negotiated transaction, commercial mortgage-backed securities and low-income housing tax credit portfolios.
Freddie Mac is a stockholder-owned corporation that purchases single-family and multifamily residential mortgages and mortgage-related securities. It then packages the loans into securities that can be sold to investors, according to its Web site. Freddie Mac does retain some loans in its portfolios, however.
Corbiere spoke briefly about the recent accounting scandal that has hit a similar corporation, Fannie Mae. It has taken two years, according to Corbiere, for Freddie Mac to rebound from its own accounting issues.
“We will get through this,” Corbiere said, adding when Freddie Mac was in trouble, Fannie Mae felt the impact.
Fannie Mae has been accused of accounting manipulations and could face an $11 billion earnings restatement. Two years ago, regulators discovered that Freddie Mac had misstated earnings for 2000 through 2002 by $5 billion.
‘A Real Focus’
But Corbiere was really in Boston to discuss the multifamily market. The U.S. Department of Housing and Urban Development requires Freddie Mac to finance 52 percent of purchases by low- and moderate-income borrowers, according to Corbiere.
“That’s a big number,” Corbiere said.
In 2003, Freddie Mac had about $750 billion in single-family loans and $23 billion for multifamily loans. Corbiere said multifamily loans fit about 20 percent of HUD’s goals. He added that HUD’s goals are going up, which means multifamily business will increase.
Freddie Mac has a $97 billion multifamily portfolio. Almost $40 billion is comprised of flow or conventional loans. Corbiere said the average deal is about $10 million for those types of loans. Freddie’s other lines of business include institutional sales, which include the five- to 50-unit category. Targeted affordable housing is another portion of Freddie Mac’s portfolio, one that is getting more attention.
“These are a real focus,” Corbiere said.
In Freddie Mac’s multifamily portfolio, low-income housing tax credit equity equates to $3.4 billion.
Commercial mortgage-backed securities, or CMBS, are also a substantial piece of Freddie Mac’s portfolio. According to Corbiere, CMBS make up $22.9 billion of the agency’s multifamily portfolio. CMBS are also trading right on top of corporate bonds, Corbiere said.
“It’s got tremendous traction,” he said.
As house prices continue moving upward, Corbiere told attendees, Freddie Mac will focus its attention on affordable housing.
“We continue to really focus on affordable housing,” he said. “Multifamily is a critical part of that.”
He also acknowledged that the affordable housing business is a “specialized” one, especially in Boston.
“It’s tough to do business in Boston on the multifamily side,” he said.
He added that it is also important that lenders try to accommodate borrowers.
“Every deal you do is a new product,” Corbiere said. “That’s what you have to do today to do business.”
Freddie Mac’s multifamily portfolio is based on the success of its nationwide correspondents who sell and service loans, Corbiere said.
“Our business model is one of working with exclusive correspondents,” Corbiere said.
According to Freddie Mac’s Web site, “Freddie Mac’s Program Plus network is a highly selective group of experienced multifamily lenders with over 150 branches across the nation.” Because of the small size of the network, Freddie Mac says, it can ensure quality originations and provide a high level of service to lenders and their borrowers.
Applicants must meet minimum eligibility requirements to even be considered for the program. Some of the criteria include a minimum adjusted net worth of $2 million, minimum liquid assets of $200,000 and 150 mortgages secured by income properties and/or multifamily properties.
Corbiere noted that the partnership Freddie Mac has with its correspondents is critical to its success.
“I really believe in relationships,” he said. “Sometimes I worry we forget how important relationships are in this business.”
In the affordable housing arena, Corbiere said the ability to be flexible is important.
“In the affordable [housing] business, you have to fund a higher loan-to-value,” he said.
With prices so high, Realtors and lenders fear there will be a housing bubble. Corbiere said it is possible, but that he doubts the bubble would burst.
“It’s hard to image there isn’t a bubble,” he said. “Our economist feels there will be a leveling out of crazy residential prices, but not a bursting. People feel the bubble itself will flatten out, get a little soft, but it won’t explode.”
As for the current state of the industry, Corbiere had a positive outlook.
“The market is crazy; there is tons of money out there,” he said. “It’s a great time to be a borrower. It’s a great time to be in real estate finance.”
Jennifer Jope may be reached at jjope@thewarrengroup.com.
