Freddie Mac [1] announced Monday the expansion [2] of its single-family credit risk transfer initiatives by enhancing disclosures, and at the same time the GSE announced its intent to sell its second Structured Agency Credit Risk (STACR) offering of debt notes for 2016.
The latest offering, STACR 2016-HQA1, is priced at $475 million and contains loans with LTVs ranging from 80 to 95 percent. The offering has a reference pool of single-family mortgages with an aggregate unpaid principal balance (UPB) of $17.5 billion. The pool contains a subset of 30-year fixed-rate single-family mortgages Freddie Mac acquired during a three month period between April 1, 2015, and June 30, 2015, according to the announcement.
According to Freddie Mac’s announcement, the enhanced disclosures for the GSE’s single-family credit risk transfer initiatives include:
- Quarterly updates of credit scores for outstanding loans in all transactions
- Updated mark-to-market LTVs, provided quarterly, leveraging property values estimated by Freddie Mac’s proprietary Home Value Explorer Automated Valuation Model tool
- Loan-level mortgage insurance details, such as lender-paid vs. borrower-paid mortgage insurance
- Details on loan modifications such as the type of modification, the program it was completed through, and step-rate information
“By providing more ongoing information, investors can better analyze our seasoned Credit Risk Transfer securities,” said Kevin Palmer, SVP of Freddie Mac Credit Risk Transfer. “Improved analytics reduces the uncertainty for internal valuation and secondary trading activities.”
Freddie Mac began its credit risk transfer sharing initiatives as a way to transfer a portion of the risk on residential single-family mortgages to private investors and away from taxpayers. Freddie Mac has been a leader in risk-sharing initiatives since introducing its STACR series in mid-2013, followed by the Whole Loan Securities (WLS) series and ACIS. Through 18 STACR offerings (prior to the one just announced), 15 ACIS transactions, and two WLS offerings, Freddie Mac has transferred a substantial portion of credit risk for more than $422 billion in UPB on single-family mortgages. Freddie Mac’s investor base has grown to more than 190 unique investors (including reinsurers).
Earlier in February, Freddie Mac announced its first ACIS transaction of 2016 [3], with a combined maximum limit of approximately $450 million of losses on single-family loans.
More information is available on the Credit Risk Transfer [4] page on Freddie Mac [1]’s website.