Freddie Mac, one of the largest providers of funding for U.S. housing funds, is set to break ground on its first bond backed by commercial mortgages, according to a source familiar with the offering.

The sale is expected to be about $1 billion, through a trust organized by Deutsche Bank, the source said.

Fannie Mae CEO Daniel Mudd (L)
and Freddie Mac CEO Richard Syron  on Capitol Hill in Washington September 20, 2007.  (Kevin Lamarque/ Reuters)

Freddie Mac and rival Fannie Mae have been the main sources of funding for multifamily housing with the $700 billion market for commercial mortgage-backed securities frozen for the past year. Its multifamily portfolio in the first quarter increased to $75.7 billion from $72.7 billion at the end of 2008.

A Freddie Mac spokesman declined to comment.

The McLean, Virginia-based company already issues billions of dollars in residential mortgage-backed securities each month. Those MBS are guaranteed by Freddie Mac.

The new commercial securities may also carry some form of Freddie Mac backing, the source said.