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Freddie Mac Announces STACR’s Inaugural Actual Loss Transaction

freddie-mac-twoFreddie Mac announced on Monday that it intends to pre-market the first actual loss Structured Agency Credit Risk (STACR) offering starting Monday, April 13.

The offering, known as STACR-2015-DNA1, is subject to market conditions. While this STACR offering will be similar to Freddie Mac's recent STACR transactions, the difference will be that losses will be allocated based on actual losses realized on the related reference obligations as opposed to allocating losses to the debt notes based on a fixed severity approach.

Freddie Mac will continue to sell the first loss and mezzanine tranches. The GSE will retain a vertical slice of each tranche sold. Freddie Mac's historical loan-level dataset is available on its website; about 17 million 30-year fixed-rate single-family mortgages that originated between January 1, 1999, and June 30, 2013, are covered. Certain loan-level actual loss data points are now included in this information after recent updates.

"We think the market of the future, where increasing amounts of credit risk will be transferred to private investors, will be actual loss based and we are excited to begin that transition with the next STACR offering," said Mike Reynolds, Freddie Mac Vice President of Credit Risk Transfer.

The STACR offering announced on Monday is Freddie Mac's inaugural actual loss transaction and its third transaction this year. It is the 12th STACR transaction 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.

The structuring lead manager for the latest STACR offering will be Credit Suisse, and Citigroup will be the co-lead manager and joint bookrunner.

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.
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