Freddie Mac is marketing its first risk sharing deal of 2014, according to a presale report by Kroll Bond Ratings.
STACR 2014-DN1 risk-sharing tranches are rated either single-A or triple-B. There are seven such tranches representing $2.4 billion of the $32.44 billion deal.
"The notes themselves will not be secured by any collateral," the Kroll presale states. "The notes will instead be unsecured obligations of Freddie Mac and, much like the agency MBS that Freddie Mac currently guarantees, will not be explicitly guaranteed by the federal government."
The top originators, and top servicers as well, are Wells Fargo, US Bank and JP Morgan. Nearly one-fourth of the mortgages originated in California. The average borrower FICO of 761 is also "well above Freddie Mac's historical pre-crisis average and in line with recent prime jumbo RMBS."
Kroll does note the loan-to-value ratios in the Freddie transaction are higher than any recent private mortgage bond deals but adds their default model is sensitive to the risk this may create.
Also, Freddie Mac does not make representation and warranties part of the transaction, therefore the government-sponsored enterprise can use its own discretion when reviewing obligations. However, the GSE is aligned enough with investors that Kroll does not view this as a material risk.
Another over-hanging concern, one Kroll couldn't decide is decisively positive or negative, is the conservatorship status of the GSEs. While the Federal Housing Finance Agency continues to support Freddie Mac, the STACR deals should be fine. A conversion to receivorship status could put future investor payments at risk, Kroll states.