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Freddie Mac Variable Liquidity Pricing
Freddie Mac's liquidity facility for tax-exempt bonds provides investors with increased financial flexibility.
Freddie Mac Variable Liquidity Pricing for Targeted Affordable Housing (TAH) Properties
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 in 2024
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)
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
*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 SOFR index exceeds the 3-month Treasury Bill rate.
Advantages:
Disadvantages: