Freddie Mac Variable Liquidity Pricing for Targeted Affordable Housing (TAH) Properties
Freddie Mac's Liquidity Facility for Tax-Exempt Bonds Provides Investors Increased Financial Flexibility
Freddie Mac's Variable Liquidity Pricing provides an incredibly useful liquidity facility for tax-exempt bonds. The Variable Liquidity Pricing facility has both a fixed-rate component, which lasts for five years, and a variable-rate component, which resets every 90 days. This liquidity facility is available for both retail bond credit enhancements (immediate funding and forwards) and Tax-Exempt Bond Securitization (TEBS) transactions, and is available for eligible mixed-use properties.
To learn more, check out Freddie Mac’s official Variable Liquidity Pricing Product Sheet or keep reading below for an in-depth explanation of the Freddie Mac Variable Liquidity Pricing program.
Sample Freddie Mac Terms For Variable Liquidity Pricing
Eligible Transactions: Targeted Affordable Housing (TAH) retail bond credit enhancement transactions involving immediate fundings and funded forwards and Tax-Exempt Bond Securitization (TEBS) transactions.
Credit Enhancement Term: 10 to 30 years
Liquidity Contract Term: 5 years (renewal may be subject to availability)
Cap Primary Test: 52-week SIFMA Index + 2% stress + fees* (does not include liquidity fee) + 1.85% for variable liquidity facility (stressed rate)
Cap Secondary Test: Cap strike rate + fees* (not including liquidity fee) + actual variable liquidity pricing at the time of underwriting (includes fixed component + variable component)
*Fees usually consists of Freddie Mac guarantee fees, servicing fees, re-marketing agent fees, trustee fees, and issuer fees.
Interest-Rate Caps: All variable-rate bonds require 5-year minimum interest rate cap to reduce risk.
Maximum LTV: 80% of adjusted or 85% of market value (retail transactions only)
Ongoing Liquidity Fee Structure: Fixed component (will be determined in contract) + a variable component (spread) that adjusts each quarter.
Variable Component/Spread: Calculated by determining the amount (if any) by which the 90-day LIBOR index exceeds the 3-month Treasury Bill rate.
Eligible mixed-use properties supported
Extensions are often permitted with the repricing of the fixed component
Up-front Liquidity Fee of 0.5% due at application
Variable-rate bonds require 5-year interest rate cap