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Community Reinvestment Fund, USA (CRF), a Minneapolis-based nonprofit that creates a secondary market for loans made by community-based development organizations, has become one of the first nonprofits to assemble a real estate mortgage investment conduit (REMIC) of affordable multifamily loans totaling $87 million. CRF obtained a Standard and Poor's AAA rating on 75 percent of the loans.
Last summer, CRF closed an offering of commercial mortgage pass-through certificates totaling $86,855,307. Of this amount, $64,140,307 (75 percent of the total) received an AAA Standard and Poor's rating. Equal amounts of $8,590,000 (10 percent) received an A rating and a BB rating. The remainder of the offering was unrated.
For-profit entities commonly assemble REMIC securities with underlying market-rate housing loans, but it is very uncommon for nonprofits to do so, a Standard and Poor's official said.
All of the loans in CRF's offering were for multifamily low-income housing tax credit properties. The offering was backed by 46 multifamily property loans, primarily in California, Florida, Wisconsin, and Washington state. Of the 46 loans, 54.6 percent were located in California, 28.2 percent in Florida, 12.8 percent in Wisconsin, and 4.4 percent in Washington. Twenty-two of the 46 loans were originated by the California Community Reinvestment Corporation and 10 were originated by the Wisconsin Housing and Economic Development Agency.
The loans were seasoned for at least five years and none was more than 30 days past due during the 12 months prior to the offering.
Frank Altman, president and CEO for CRF USA, said that the Standard and Poor's-rated offering enabled CRF USA to attract new investors. One of the new investors, Northwestern Mutual, said that CRF's offering provided it with a highly efficient and attractive channel for ensuring that its investment produced a substantial community impact while generating a market rate of return.
A number of foundations and financial institutions — including Fannie Mae Foundation, F.B. Heron Foundation, MetLife, US Bank, and Wachovia Bank — provided the warehouse financing that allowed CRF to generate a loan pool large enough for a rated transaction.
The offering was the 17th in a series assembled by CRF, although it was the first CRF offering rated by Standard and Poor's.
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