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. 



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)

Interest Rate:  

  • 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 LTV80% 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. 

Advantages:

  • Eligible mixed-use properties supported 
  • Extensions are often permitted with the repricing of the fixed component

Disadvantages:

  • Up-front Liquidity Fee of 0.5% due at application 
  • Variable-rate bonds require 5-year interest rate cap