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Freddie Mac announced Tuesday it has had its second Freddie Mac Seasoned Loan Transaction (SLST) via auction of 1,262 seasoned re-performing loans (RPL) and moderate delinquent loans serviced by Select Portfolio Servicing, Inc. Through its advisors, Freddie Mac began marketing the transaction to potential bidders May 17, 2017, and is expected to settle in July 2017.
The SLST securitization program is an important part of Freddie Mac’s seasoned loan offerings initiatives meant to reduce less liquid assets in its mortgage-related investments portfolio and shed credit and market risk via economically reasonable transactions. Similar to FHFA’s requirements applicable to the sale of nonperforming loans, the servicing of the loans will be in accordance to RPL requirements, which will prioritize borrower retention options in the event of a default and promote neighborhood stability.
The transaction, which is a two-step structured sale of seasoned loans, will first require a competitive bidding process, subject to a securitization term sheet. Second, the purchaser of the loans will securitize them. Freddie Mac will guarantee and purchase the senior tranche of the securitization. The first loss subordinate tranche will initially be retained by the loan purchaser. A key requirement of this transaction is that the buyer of the loans, and therefore the subordinate tranche, be an investor with substantial experience in managing both performing and moderately delinquent mortgage loans as well as securitizing mortgage loans.
The collateral is comprised of fixed- and step-rate modified seasoned loans. These loans were modified to assist borrowers who were at risk of foreclosure to help them keep their homes. The aggregate pool is geographically diverse and has a loan-to-value ratio of approximately 101 percent, based on Broker Price Opinions.
Unpaid Principal Balance was reported at $291.6 million with a loan count of 1,262. BPO CLTV, weighted by BPO, was 101 and the average loan balance was 231.1. The winning bidder, Towd Point Master Funding, LLC, was followed by a bid in the high $70s.
