[1]Freddie Mac [2] announced [3] on Thursday its intention to sell a Structured Agency Credit Risk (STACR [4]) debt note offering worth $725 million, pending conditions of the market.
The STACR offering announced Thursday 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. In a public speech [5] earlier this month, Mel Watt, Director of Freddie Mac’s conservator, the Federal Housing Finance Agency, said that 2014 was a "breakthrough year for the Enterprises' single-family credit risk transfer program."
STACR Series 2015-HQ1 [6] 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. Freddie Mac is issuing 150 basis points of first loss and rating the M-3 bond with STACR Series 2015-HQ1. 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. Credit Suisse and Bank of America Merrill Lynch will serve as co-lead managers and bookrunners for the transaction.
"We expect routine sales of the higher LTV benchmark HQ series to facilitate more transparency and liquidity in the credit risk transfer market," said Mike Reynolds, Freddie Mac VP of Credit Risk Transfer.
Freddie Mac and fellow GSE Fannie Mae were taken under conservatorship of the FHFA in September 2008, and both received a combined total of $188 billion in bailout money from taxpayers. Both GSEs returned to profitability in 2012, although they saw a sharp decline in profits for 2014 and the FHFA’s Inspector General issued a report earlier this week [7] saying the continued profitability of the GSEs is not assured.