Freddie Mac Announces Pricing For Second Structured Credit Risk Offering of 2015

Less than a week after announcing its intention to sell its second Structured Agency Credit Risk (STACR) offering this year, Freddie Mac announced on Tuesday that it has priced the offering at $860 million.

The offering, known as STACR Series 2015 HQ-1, features a reference pool of recently-originated single-family mortgage loans with LTVs ranging from 80 to 95 percent. Those loans have an unpaid principal balance totaling more than $16.5 billion.

Tuesday's announced price for the offering is higher than the originally predicted price of $725 million, pending market conditions, which was announced on Thursday, March 19.

"Investor demand for the HQ deal was high, and we were able to make a modest upsize of the transaction," said Mike Reynolds, Freddie Mac vice president of Credit Risk Transfer. "This is a part of Freddie Mac's strategy to be responsive to the market."

According to Freddie Mac, pricing for the STACR 2015 HQ-1 offering is as follows: For the M-1 class, pricing was one month LIBOR (London Interbank Offered Rate) plus a spread of 105 basis points; for M-2, one month LIBOR plus a spread of 220 basis points; for M-3, one month LIBOR plus a 380 basis point spread; and for the B class, one month LIBOR plus a 1,075 basis point spread.

Freddie Mac is issuing 150 basis points of first loss within the capital structure with STACR Series 2015-HQ1. Kroll Bond Rating Agency and Moody's Investors Services will rate the M-1, M-2, and M-3 classes. Freddie Mac holds the senior loss risk in the reference pool; for Class M-1, M-2, and M-3 and the first loss Class B tranche, Freddie Mac holds a portion of the risk. According to Freddie Mac's announcement, the offering is scheduled to settle on or around March 31.

Pricing for the STACR Series 2015-HQ1, M-1 class was one-month LIBOR plus a spread of 105 basis points. Pricing for the M-2 class was one month LIBOR plus a spread of 220 basis points. Pricing for the M-3 class was one month LIBOR plus a spread of 380 basis points. Pricing for the B class was one month LIBOR plus a spread of 1075 basis points. The offering is scheduled to settle on or around March 31, 2015.

The STACR offering priced on Tuesday is the GSE’s second this year and 11th overall. Freddie Mac began the STACR program in the second half of 2013 as part of the Enterprise’s goal of reducing risk to taxpayers by increasing private capital’s role in the mortgage market. Freddie Mac has laid off a substantial portion of credit risk for more than $205 billion in unpaid balances on single-family mortgages through STACR transactions, according to the GSE.

Credit Suisse and Bank of America Merrill Lynch will serve as co-lead managers and bookrunners for the transaction, according to Freddie Mac.