[1]Freddie Mac [2] has announced its intention to sell more than $1 billion worth of notes in its latest Structured Agency Credit Risk (STACR) offering, according to an announcement from the GSE [3].
The latest STACR offering, STACR Series 2015-DNA3, is the seventh STACR debt notes offering this year of more than $1 billion by Freddie Mac. It is the 15th STACR offering since the program began slightly more than two years ago. Freddie Mac’s goal is to transfer a portion of its credit risk on single-family loans to private investors. Through the first 15 STACR offerings and 10 Agency Credit Insurance Structure (ACIS) transactions, Freddie Mac has laid off a substantial portion of credit risk on more than $330 billion in unpaid principal balance (UPB) for single-family mortgages, according to the announcement.
Freddie Mac was the first agency to use STACR and ACIS to market credit risk transfer transactions; in just two years, the investor base has grown to include more than 170 unique investors, according to Freddie Mac.
“For Freddie Mac, credit risk transfer is not a ‘pilot’ anymore. It is integrated into our entire business model,” Freddie Mac CEO Donald Layton said in a statement earlier this week. “Depending upon how you measure it, in Single-Family, we are selling off in the range of 2/3 or 3/4 of the non-catastrophic risk. Single-family risk transfer was zero a few years ago by comparison. Now it's a fast-moving field. The instruments we use are growing and evolving. We're also doing this with sound economics. It's very exciting.”
“For Freddie Mac, credit risk transfer is not a ‘pilot’ anymore. It is integrated into our entire business model.”—Donald Layton
STACR Series 2015-DNA3 is Freddie Mac’s fourth STACR transaction in which losses are allocated based on actual losses realized on the related reference obligations instead of using a fixed severity approach to allocate losses. The latest STACR offering features a reference pool of single-family mortgages acquired by Freddie Mac from December 2014 through March 2015. The loans have an aggregate UPB of more than $34.7 billion. According to Freddie Mac, the Enterprise holds the senior loss risk in the reference pool and a portion of the risk for Class M-1, M-2, M-3, and the first loss Class B tranche. In mid-September, Freddie Mac expanded its STACR debt notes program with a high LTV offering [4] that included loans with LTVs ranging from 80 to 95 percent.