Less than one week after Freddie Mac's Structured Agency Credit Risk (STACR) debt notes received the RMBS Deal of the Year award from Global Capital, Freddie Mac announced the pricing of the fifth STACR offering of 2015 on Monday.
The latest STACR debt notes offering, 2015-DNA2, was priced at $950 million (pending market conditions), making it the second-highest total for a STACR offering this year. The third offering was originally announced in April at $720 million but shortly increased up to $1.01 billion due to market demand. Freddie Mac expects to make eight STACR offerings overall in 2015.
The 2015-DNA2 offering will be Freddie Mac's second offering in which losses will be allocated based on actual losses realized on the related reference obligations rather using a fixed severity approach to allocate losses (the first such transaction for Freddie Mac occurred in May, priced at $425.6 million). The reference pool of single-family mortgages for Series 2015-DNA2 includes loans originated from August to November 2014 with an aggregate UPB of more than $31.9 billion.
Co-lead managers and joint bookrunners for the transaction are Merrill Lynch, Pierce, Fenner & Smith, and JPMorgan Securities. The approximate date for when the offering will settle is June 29, 2015. Freddie Mac holds the senior loss risk in the reference pool as well as a portion of the risk for Class M-1, M-2, M-3 and the first loss Class B tranche; the M-1, M-2, M-3, and MACR classes are rated by Kroll Bond Ratings Agency and Moody's.
Freddie Mac transfers a portion of credit risk on certain single-family loans to private investors using the STACR program and has led the market in introducing new risk-sharing initiatives in the last two years. Since initiating the program in 2013, Freddie Mac has laid off a portion of credit risk on more than $281 billion in unpaid principal balance for single-family mortgages through 13 STACR offerings and seven Agency Credit Insurance Structure (ACIS) transactions. More than one million loans have been represented in those transactions.
The STACR offerings have received two major awards in the last two years; apart from Friday's announcement of receiving the RMBS Deal of the Year award from GlobalCapital, STACR received the Global Structured Deal of the Year Award from GlobalCapital's parent company, Euromoney, in 2014. Kevin Palmer, VP of Credit Risk Transfer at Freddie Mac, said the Enterprise is "proud of our role in leading market innovations that return value to the nation and move housing forward."