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Freddie Mac Continues Transferring Credit Risk to Private Investors

freddiemac [1]Freddie Mac [2] has continued its successful credit risk transfer initiatives with another Structured Agency Credit Risk (STACR) [3] Offering priced at more than $1 billion, according to an announcement [4] from Freddie Mac.

This debt notes transaction, STACR Series 2015-DNA3, is Freddie Mac’s seventh of the year and is a continuation of Freddie Mac’s efforts to reduce its exposure to credit risk and at the same time bring private investors back into the single-family market.

“We have demonstrated our ability to execute credit risk transactions on a regular basis with a standard structure and have been transparent in our disclosures,” said Mike Reynolds, Freddie Mac vice president of Credit Risk Transfer. “Our loans are subject to Freddie Mac's underwriting standards, internal fraud prevention and quality control review process. We are finding with each issuance that STACR is more diverse, liquid and durable.”

The loans in the reference pool comprising STACR Series 2015-DNA3 are single-family mortgages acquired by Freddie Mac from December 2014 through March 2015. The loans in the reference pool have an aggregate unpaid principal balance (UPB) of more than $34.7 million. Freddie Mac holds the senior loss risk in the reference pool and a portion of the risk associated with Class M-1, M-2, and M-3, and the first loss Class B tranche.

Freddie Mac’s risk-sharing initiatives include 16 STACR debt note offerings (including this one) and 11 Agency Credit Insurance Structure (ACIS) transactions since becoming the first agency to market credit risk transfer transactions with STACR and ACIS in the middle of 2013. Since then, Freddie Mac has grown its investor base to more than 170 unique investors, including reinsurers. The Enterprise has laid off a substantial portion of credit risk on single-family mortgages totaling $367 billion in UPB.

This transaction is the fourth in the STACR program out of the 16 transactions that provides coverage on an actual loss basis, according to Freddie Mac.