Securitization in Relation to the Freddie Mac SBL Program
In the process of securitization, loans are pooled together and sold to investors. Many types of commercial and multifamily loans, including HUD/FHA multifamily loans, Freddie Mac and Fannie Mae multifamily loans, and CMBS loans are securitized. Securitization significantly increases the amount of money available for borrowers, as lenders can make a loan, sell it for securitization, and can use the proceeds to make another loan, beginning the process all over again.
In the case of Freddie Mac Multifamily securitizations, lenders sell the loans directly to Freddie Mac, which will place the loans in a third-party trust, after which they will be sold as bonds on the secondary market. Most classes of Freddie Mac bonds are guaranteed by Freddie Mac, though certain subordinate and mezzanine bonds are not. Unlike U.S. Treasury bonds, Freddie Mac bonds are not explicitly backed by the full faith and credit of the U.S. government, however, they are implicitly government-guaranteed, as most investors believe Freddie Mac would receive a bailout were it to struggle financially (as it did in 2008). In regards to the Freddie Mac SBL program, all (or nearly all) loans are securitized. For borrowers, this means that their Optigo Small Balance Loans will sometimes not be serviced by their original lender, though this is not always the case.