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Freddie Mac’s CRT Program ‘Came Charging Back’ in Q3

Freddie Mac's [1] Single-Family business announced Wednesday that its Credit Risk Transfer (CRT) [2] program transferred credit risk via $6.4 billion of issuance on $167.3 billion of single-family mortgages from U.S. taxpayers to the private sector in the third quarter of 2020. The issuance included Structured Agency Credit Risk (STACR), Agency Credit Insurance Structure (ACIS), and approximately $1 billion of senior subordination securitization structures and certain lender risk-sharing transactions. Since the beginning of the year, the company has transferred $12.1 billion on $308.6 billion of mortgages.

“After taking a pause to assess the impact of the pandemic in the second quarter, Freddie Mac’s CRT program came charging back in the third,” said Freddie Mac’s Mike Reynolds, Vice President of Single-Family CRT. “Several of our offerings were oversubscribed and upsized, suggesting investors were ready for the return of new issuances in this asset class.”

Through its flagship offerings, Freddie Mac issued approximately $5.4 billion across four STACR and five ACIS transactions in the third quarter. Among the notable transactions was the STACR REMIC 2020-HQA4 offering, the last scheduled STACR deal tied to LIBOR before the company moved to an alternative reference rate for later issuances. Another was ACIS 2020-AFRM1, the company’s first ACIS Forward Risk Mitigation transaction of 2020, which transfers up to $450 million of credit risk on a reference pool of single-family loans with a maximum unpaid principal balance of $17.3 billion to a diversified panel of 17 insurance and reinsurance participants.

As a result of STACR and ACIS on-the-run transactions this quarter, Freddie Mac transferred between 79% (high LTV HQA series) and 85% (low LTV DNA series) of the credit risk on the underlying reference pools, helping to reduce the capital required under the Conservatorship Capital Framework (CCF). As of September 30, 2020, 44% of the Single-Family guarantee portfolio was covered by certain CRT transactions, and conservatorship capital needed for credit risk on this population was reduced by approximately 76% through these CRT transactions based on prescribed CCF guidelines.

Since the first CRT transaction in 2013, Freddie Mac’s Single-Family CRT program has cumulatively transferred $64 billion in credit risk on $1.7 trillion in mortgages through STACR, ACIS, certain senior subordination securitization structures, and certain lender risk-sharing transactions.

Freddie Mac’s Single-Family CRT [2] programs transfer credit risk away from U.S. taxpayers to global private capital via securities and (re)insurance policies.

According to Freddie, "We founded the GSE Single-Family CRT market when we issued our first STACR notes in July 2013. In November 2013, we introduced our ACIS program. Today, CRT serves as the primary source of private capital investment in residential mortgage credit. For specific STACR and ACIS transaction data, please visit Clarity [3], our CRT data intelligence portal."