New CUSIP registration option streamlines access for municipal bond investors
Freddie Mac Multifamily has announced a new initiative to expand investor access to its Tax-Exempt Loan (TEL) CMBS product.
The change will allow municipal bond investors to invest in Freddie Mac's ML-Deals through a newly introduced CUSIP registration capability. The mortgage giant said this innovation is expected to boost liquidity across both commercial mortgage-backed securities (CMBS) and municipal bond markets while advancing Freddie Mac’s mission to support affordable housing.
The new capability enables investors to choose between a mortgage CUSIP identifier or a municipal CUSIP identifier at deal settlement. Certificates can also be exchanged between these two identifiers through a Freddie Mac-approved broker-dealer.
ML-Deals under the new framework will include two sets of Structured Pass-Through Certificates (SPCs):
- One registered under Freddie Mac’s corporate issuer 144A CUSIP identifier.
- Another registered under the municipal issuer 144A CUSIP identifier.
Since 2017, Freddie Mac’s ML program has allowed investors to participate in securities secured by tax-exempt loans on completed, occupied, and stabilized affordable housing properties. These loans are often linked to properties receiving new-issue 4% Low-Income Housing Tax Credits (LIHTC).
The first deal under the new CUSIP feature, ML-27, is expected to hit the market during the week of December 9, with an issuance size of approximately $250 million. The deal will also carry the Sustainability Bonds designation.
The underlying loan characteristics and structure will remain identical across both sets of SPCs. However, it’s important to note that while the loans are obligations of various state and local entities, the SPCs themselves are not classified as municipal securities under the Securities Exchange Act of 1934. Freddie Mac is not categorized as a municipal issuer.
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“This new registration capability streamlines our product to both mortgage and municipal bond investors, which is important to meet market needs and deliver on Freddie Mac’s mission to support affordability, liquidity and stability in the multifamily housing market,” Robert Koontz, senior vice president of Multifamily Capital Markets at Freddie Mac, said in a media release. “We look forward to continuing to innovate and advance our offerings to respond to market changes while keeping a clear focus on our mission.”
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