Freddie Mac recently closed its first direct purchase of a tax-exempt loan. The loan financed the acquisition and rehabilitation of a 417-unit senior housing community in Dayton, Ohio known as The Lakewoods. The deal represents a notable milestone for the GSE, and a new, more cost-effective financing solution for participants in the affordable housing sector.
The 16-year, fixed-rate loan to the borrower was made through the Ohio Housing Finance Agency and originated by Walker & Dunlop, a Freddie Mac seller/servicer. In addition to the subsidy provided by the loan’s tax-exemption, the innovative financing plan for The Lakewoods also employed 4% Low Income Housing Tax Credits and a HUD Senior Preservation Rental Assistance Contract (SPRAC) applicable to 95% of the units, one of the first uses of this new federal subsidy for senior housing preservation.
Freddie Mac first announced its Direct Purchase of Tax-Exempt Loans initiative in April 2014. The program covers tax-exempt loans made through state or local governmental entities to finance affordable housing for lower income families. As Kim Griffith, Freddie Mac Multifamily Vice President for Affordable Sales and Investments, indicates: “This execution can lower a borrower’s issuance costs and ongoing cost of capital significantly, as well as simplify the closing process. It is an alternative financing solution to our bond credit enhancement execution and is particularly attractive for 4% LIHTC developments.”
Ballard Spahr assisted Freddie Mac with the development of all the loan and real estate documentation for the new program. Needless to say, we at Ballard were very pleased and excited to be able to represent both Freddie Mac and Walker & Dunlop in the closing of this landmark transaction.
For additional information, click on the link below:
http://www.freddiemac.com/multifamily/blog/kimball_griffith/20140902_tax_exempt_loans.html