Freddie Mac To Lift Blacklist On Meridian Capital Group, Add New Guardrails

Freddie Mac will be ready to buy mortgages arranged by Meridian Capital Group as early as the start of next year following an investigation the lender launched into the debt broker almost a year ago.

As of Jan. 1, the agency will start buying loans from Meridian again — subject to certain conditions, Bloomberg reported. Its reporting followed a leaked email from CEO Brian Brooks to Meridian's staff, which was first reported on X Tuesday evening by The Promote.

"The decision to consider loans submitted by our lenders that are brokered by Meridian Capital Group comes after a thorough review process and enhancements to our lender requirements," a spokesperson for Freddie Mac told Bisnow in a statement. "We are continuing to closely monitor brokered loan activity to ensure our requirements are being followed.”

Meridian-brokered loans will still face extra scrutiny on top of the usual requirements for Freddie deals. If a borrower defaults for any reason within the first 12 months or if fraud is uncovered at any time, Freddie retains the right to require the original lender to repurchase the Meridian-brokered loan.

Buildings covered by a Meridian-brokered loan will face extra inspections and lease audits that cover double the number of units normally covered by Freddie's due diligence processes. The brokerage will also be required to provide an extra assurance that loans are accurate, complete and free from fraud.

"We are excited about our reinstated ability to offer our clients agency lending options and we believe our efforts to create a best-in-class approach to compliance will set the tone for the commercial mortgage brokerage industry," Brooks said in a statement Thursday afternoon.

Government-sponsored mortgage lenders Fannie Mae and Freddie Mac implemented a pause on Meridian-brokered deals in November but didn’t disclose the details of the investigation at the time. A day later, Fannie announced measures requiring all loans brokered by Meridian to face additional reviews.

By March, Fannie and Freddie had “effectively blacklisted” the brokerage, which is one of the country’s largest commercial brokers. Brokers would also be blacklisted even if they moved firms, The Wall Street Journal reported at the time.

More details of the allegations were reported at that time, with Meridian facing claims that its brokers had fabricated numbers in applications to get larger loans for their clients. 

Brooks, a former financial regulator, was hired as CEO in March, replacing the firm’s founder, Ralph Herzka. The brokerage announced measures to tighten its due diligence processes during the leadership transition and brought in a chief risk officer, Melissa Martinez, in June.

In Brooks' message to staff, Martinez was one of the people Brooks credited with having the freeze lifted.

“I am over the moon with this good news — the future is brighter than ever for this great company,” Brooks wrote to staff, according to the memo published by The Promote.

The brokerage had also attracted further scrutiny due to its relationship with New York Community Bank, which almost collapsed last year. The bank, which saw huge losses on its commercial real estate loan book earlier this year, reportedly leaned on Meridian to find borrowers. However, it is unclear if any of NYCB’s bad loans were brokered by Meridian, the WSJ reported in July.

UPDATE, OCT. 10, 3:30 P.M. ET: This story has been updated to include a comment from Meridian CEO Brian Brooks.