CHICAGO -- The Federal Home Loan Mortgage Corp. kicked off a program Wednesday that could make billions of dollars in loans available for low- and moderate-income rental housing around the country.
The federally chartered agency, known as Freddie Mac, announced the first deal in a $100 million multifamily-housing pilot program, involving a package of loans totaling $5 million held by Harris Bank.
The loans were made on eight Chicago buildings with a total of 219 apartment units.
Jack Weir, president of the New York-based Local Initiatives Man
aged Assets Corp., which worked with Freddie Mac on the deal, said the new program could have an "enormous" impact in providing capital for the often complex deals by which public and private groups team up to acquire, rehabilitate and construct apartment buildings for low- and moderate-income renters.
Such deals have become the backbone for providing affordable rental housing in Chicago and other cities since the federal government cut most of its multifamily-housing
programs during the Reagan administration.
Mr. Weir said the Freddie Mac pilot program could encourage commercial lenders to make affordable multifamily loans and also open a way for pension funds to invest in the loan packages.
In the Chicago deal, Local Initiatives bought the $5 million Harris mortgage portfolio, swapped the mortgages for Freddie Mac securities and sold the securities to the Evanston, Ill.-based General Board of Pensions of the United Methodist Church.
Gale Whitson-Schmidt, treasurer for the $4.8 billion church pension fund, said at a press conference that the investment provided a way for the church to get a good interest rate on a safe investment while having a positive social impact.
Illinois Treasurer Patrick Quinn, who is on the pension fund board for state employees, said at the conference that he would suggest to the board and to other public pension-fund boards in the state, controlling $100 billion in total assets, that they look into similar deals.
The involvement of Freddie Mac in the program marks a significant new direction for the government-sponsored agency, which mostly helps finance single-family homes by buying mortgages and packaging them into mortgage-backed securities. In its 21-year history it has contributed to financing one in eight American homes.
The agency bailed out of new multifamily finance deals in 1990 after a significant number of its loans ran into problems, but it still holds a portfolio of $11 billion in multifamily mortgages.
Thomas Watt, Freddie Mac's senior vice president for multifamily housing, said the agency had been working since then to correct past management mistakes and to put the program on a sounder business footing.
Mr. Watt added that Freddie Mac was also planning to refinance loans to free funds for repairs and increase capital reserves in the apartment projects, he added.