On Thursday, Kroll Bond Rating Agency (KBRA) assigned preliminary ratings to four classes of certificates from Freddie Mac’s Structured Agency Credit Risk (STACR) Securitized Participation Interests Trust, Series 2018-SPI3(STACR 2018-SPI3), a credit risk sharing transaction with a total certificate offering of $258,781,458. This is Freddie Mac’s fourth risk transfer deal under the STACR SPI shelf.
KBRA’s loan rating methodology consists of loan originator and servicer reviews, loan file reviews, loan analysis, and RMBS modeling, assessment of securitization structure, and surveillance.
According to KBRA, Freddie Mac’s STACR 2018-SPI3 mortgage pool consists of 19,195 residential mortgage loans with an aggregate cut-off balance of approximately $6.5 billion, which are fully amortizing, fixed-rate mortgages (FRM) of prime quality.
KBRA found that the borrowers in the pool have a weighted average original credit score of 763, well above Freddie Mac’s historical pre-crisis average and in-line with recent prime jumbo RMBS. The weighted average debt-to-income ratio of 36.5 percent is slightly higher than the DTIs that KBRA typically sees in prime jumbo RMBS, but notes that it is still consistent with Prime underwriting. The loan population includes mortgage loans acquired by Freddie Mac between June 2017 and June 2018 that meet KBRA criteria.
The weighted average loan-to-value ratio is 81.4 percent, and the weighted average combined LTV is 81.7 percent. KBRA states that these leverage ratios are higher than those in “low-LTV” STACR Debt Note reference pools.
KBRA release of the report states that “This pre-sale report is based on information regarding the underlying mortgage loans and the terms of the transaction as of September 13, 2018. The ratings shown below are preliminary and subsequent information may result in the assignment of ratings that differ from the preliminary ratings. This report does not constitute a recommendation to buy, hold, or sell securities.”
KBRA notes that all Nationally Recognized Statistical Rating Organizations are required, pursuant to SEC Rule 17g-7, to provide a description of a transaction’s representations, warranties and enforcement mechanisms that are available to investors when issuing credit ratings. KBRA’s disclosure for this transaction can be found in the report available here.