Freddie Mac Tax-Exempt Bond Securitization

The Freddie Mac Tax-Exempt Bond Securitization (TEBS) execution brings capital market efficiencies to the affordable housing market, offering owners of privately placed multifamily housing revenue bonds the potential for larger proceeds and longer terms for affordable housing transactions. Freddie Mac's Class A Multifamily Variable Rate Certificates, which it issues in connection with TEBS transactions, are fully guaranteed tax-exempt and taxable securities supported by pools of tax-exempt and taxable multifamily housing revenue bonds. Through the TEBS execution, owners of bonds are able to free up capital to use again for new affordable production by exchanging their unenhanced bonds for senior Class A Certificates (which are sold to the public) and subordinate Class B Certificates (which are retained by the bond owner and pledged to Freddie Mac).

Key Benefits

• We’ve developed the capability to issue fully guaranteed tax-exempt and taxable securities supported by pools of unenhanced tax-exempt and taxable bonds.
• As Freddie Mac-issued securities, the publicly traded Class A Certificates are more liquid than any other similarly structured security currently in the market.
• A publicly issued, agency-rated Freddie Mac security improves execution for both our sponsor and the tax-exempt bond marketplace by eliminating the need for "private label" securitizations. Our TEBS execution provides a more streamlined financing process, which includes standardized documents, thus lowering the transaction costs of the securitization. This ultimately allows lower yields to be passed on to borrowers.
• Freddie Mac provides not only credit enhancement and liquidity support for the Class A Certificates, but also serves as securities issuer and bond administrator for the life of the deal. This structure eliminates additional legal and other  financing costs associated with this type of securitization.
• Using the TEBS execution, Freddie Mac can finance affordable projects with up to 40-year amortizations and highly leveraged affordable properties.

How It Works

• Freddie Mac will guarantee the payment of scheduled principal on the bonds and all interest on the tax-exempt and taxable Class A Certificates.
• Payment to the Class B Certificates will be made on a subordinate "if available" basis only. 
• Additionally, if the Class A Certificates bear interest at a seven-day variable rate, they will be "puttable" upon five business days notice, and Freddie Mac will guarantee payment of the purchase price of any such "put" Certificates, if the remarketing agent does not remarket those Certificates within such time period.

To Find Out More

Please contact the Freddie Mac Multifamily Affordable Sales and Investments department [PDF 68K] in McLean, Va.