CARMEL, Ind. – Leading financial services provider Merchants Capital (MCC), along with Merchants Bank of Indiana (MBI), announces today that it has completed a $214 million Commercial Mortgage Backed Securities (CMBS) securitization of 14 multifamily mortgage loans secured by 24 mortgaged properties through a Freddie Mac-sponsored Q-Series transaction.
This is MCC’s second such transaction – last year, MCC secured a $262 million Q-Series transaction, which consisted of 15 workforce housing properties owned and operated by some of MCC’s biggest clients. Unlike the previous transaction, 100% of the securities were guaranteed by Freddie Mac and sold to the market. MCC will continue to sub-service the loans in the pool.
The $214 million in loans consisted of 14 multifamily properties in Georgia, Indiana, Michigan, New York and Ohio. The developments range in size from 60 to 352 units. On a weighted average basis, the portfolio had 93.7% of units under 80% area median income (AMI), 52.1% of units under 60% AMI and 26.8% of units under 50% AMI. Several properties were made possible by low-income housing tax credits (LIHTC) and the U.S. Department of Housing and Urban Development (HUD). The collateral pool is all seven-year capped adjustable-rate mortgages (ARMs), a new product for the platform.
Due to the characteristics of the underlying mortgage loans, the certificates are designated as “Social Bonds” within the Social Bonds Framework, published on Freddie Mac’s website. Proceeds from Social Bonds are used to provide liquidity to social impact financial institutions (community development financial institutions, housing finance agencies and other financial institutions), such as MBI. These social impact financial institutions finance affordable housing to low-income communities and underserved populations consistent with the Social Bonds Framework. Freddie Mac engaged Sustainalytics, Inc., an affiliate of Morningstar, Inc., to independently evaluate the Social Bonds Framework. MCC has also created its own ESG Social Bonds Framework for use in their future deals, aligning with the four core components of the Social Bond Principles from Freddie Mac, and similarly evaluated by Sustainalytics. The ongoing assessment is based on the use of proceeds, project evaluation and selection, management of proceeds and reporting.