Freddie Mac recently priced a $515 million Structured Agency Credit Risk (STACR) debt notes offering, according to a report from the GSE. This is reportedly the sixth one from Freddie Mac this year. The report states that through STACR, Freddie Mac transfers a significant portion of its mortgage credit risk on certain groups of loans to private investors.
Pricing for STACR Series 2016-HQA3 includes M-1 class which is one-month LIBOR plus a spread of 80 basis points, M-2 class which is one month LIBOR plus a spread of 135 basis points, M-3 class which is one month LIBOR plus a spread of 385 basis points, and finally, B class which is one month LIBOR plus a spread of 900 basis points.
Bank of America Merrill Lynch and Goldman, Sachs & Co. will serve as co-lead managers and joint bookrunners, according to the report.
Freddie Mac states that with the STACR 2016-HQA3 offering of loans with LTVs ranging from 80 to 95 percent, Freddie Mac holds the senior loss risk in the capital structure and a portion of the risk in the Class M-1, M-2 and M-3 tranches, and the first loss Class B tranche.
Additionally, STACR 2016-HQA3 has a reference pool of single-family mortgages with an unpaid principal balance of more than $15.7 billion. The reference pool consists of a subset of 30-year fixed-rate single-family mortgages acquired by Freddie Mac.
The report states that Freddie Mac has led the market in introducing new credit risk-sharing initiatives with STACR, Agency Credit Insurance Structure (ACIS) and Whole Loan Securities (WLS(SM)), and was the first agency to market these types of credit risk transfer transactions. The company states that it has since grown its investor base to more than 200 unique investors, including insurers and reinsurers. Additionally, since 2013, the company has transferred a significant portion of credit risk on nearly $530 billion of UPB on single-family mortgages