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Freddie Mac Transfers More Credit Risk With $1 Billion STACR Offering

seal-on-moneyFreddie Mac has announced its intention to sell more than $1 billion worth of notes in its latest Structured Agency Credit Risk (STACR) offering, according to an announcement from the GSE.

The latest STACR offering, STACR Series 2015-DNA3, is the seventh STACR debt notes offering this year of more than $1 billion by Freddie Mac. It is the 15th STACR offering since the program began slightly more than two years ago. Freddie Mac’s goal is to transfer a portion of its credit risk on single-family loans to private investors. Through the first 15 STACR offerings and 10 Agency Credit Insurance Structure (ACIS) transactions, Freddie Mac has laid off a substantial portion of credit risk on more than $330 billion in unpaid principal balance (UPB) for single-family mortgages, according to the announcement.

Freddie Mac was the first agency to use STACR and ACIS to market credit risk transfer transactions; in just two years, the investor base has grown to include more than 170 unique investors, according to Freddie Mac.

“For Freddie Mac, credit risk transfer is not a ‘pilot’ anymore. It is integrated into our entire business model,” Freddie Mac CEO Donald Layton said in a statement earlier this week. “Depending upon how you measure it, in Single-Family, we are selling off in the range of 2/3 or 3/4 of the non-catastrophic risk. Single-family risk transfer was zero a few years ago by comparison. Now it's a fast-moving field. The instruments we use are growing and evolving. We're also doing this with sound economics. It's very exciting.”

“For Freddie Mac, credit risk transfer is not a ‘pilot’ anymore. It is integrated into our entire business model.”—Donald Layton

STACR Series 2015-DNA3 is Freddie Mac’s fourth STACR transaction in which losses are allocated based on actual losses realized on the related reference obligations instead of using a fixed severity approach to allocate losses. The latest STACR offering features a reference pool of single-family mortgages acquired by Freddie Mac from December 2014 through March 2015. The loans have an aggregate UPB of more than $34.7 billion. According to Freddie Mac, the Enterprise holds the senior loss risk in the reference pool and a portion of the risk for Class M-1, M-2, M-3, and the first loss Class B tranche. In mid-September, Freddie Mac expanded its STACR debt notes program with a high LTV offering that included loans with LTVs ranging from 80 to 95 percent.

About 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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