Freddie Mac is joining the parade of companies that hope to finance housing targeted to the growing population of elderly Americans.
The government-sponsored agency launched a pilot program this month in which it will buy multimillion-dollar loans to developers of assisted- living facilities.
The program "could be rolled out as a major product line," said Mitchell Kiffe, a Freddie Mac director helping steer the program.
"We see this as a national effort for seniors" who will purchase or rent apartments at the properties, Mr. Kiffe said. "As a company that only does housing, this is an important segment of the market for Freddie Mac to be in."
Older Americans have attracted a lot of attention in the industry lately, because the market for conventional mortgages has slipped. The surging popularity of reverse mortgage programs and home equity lending can be attributed to the trend.
Freddie Mac is joining the small but growing market developing the privately financed communities, where seniors live on their own but receive help with some day-to-day tasks. Several thousand assisted-living facilities have sprung up over the past decade and demand is expected to increase, according to American Demographics.
Freddie Mac expects to purchase $25 million to $30 million of the loans by the end of this year and over $100 million in 1998. The company will initially keep the loans in its portfolio and consider securitization as volume grows, Mr. Kiffe said.
The sites are designed to appeal to seniors who no longer want to maintain their own homes but are healthy enough to stay out of nursing homes. They offer meal centers, transportation, and housecleaning, among other services.
Lenders said Freddie Mac's involvement would nurture a market that has received only limited financing, through insurance companies, some banks, and private enterprises.
Under the program, Freddie Mac will supply loans to builders whose projects meet special criteria. Mortgage companies that participate in the Freddie Mac program will receive fees for originating the loans. The loans will carry fixed rates and terms of seven to 25 years.
Mr. Kiffe declined to indicate what kind of return Freddie Mac is projecting. But he did say the company has high expectations for the effort, which is part of a growing multifamily lending unit.
Freddie Mac's assisted-living initiative "addresses the growing demand for senior housing" at fair prices, said William Shine, an executive vice president with GMAC Mortgage, Elkins Park, Pa.
Developers of assisted living facilities now pay several hundred basis points above the benchmark Treasury bond, lenders said.
With Freddie Mac making capital much more available, rates on these loans could fall, giving builders more capital for a potentially better project.
The lower rates would translate into cheaper rental costs for seniors at these sites, said Terry Havens, chairman of Reilly Mortgage Group, McLean, Va.
"If financing costs are reduced and the market becomes more efficient," Mr. Havens said, "residents will see benefits."
