Investments

Freddie Mac to make loan-level loss data available to investors

Aims to increase transparency in credit risk-sharing offerings

Investors looking for more information on the makeup of credit-risk sharing deals from Freddie Mac now have a new resource at their disposal, loan-level actual loss data.

Freddie Mac said that it is making the data available in an effort to increase investor transparency, which it expects to help investors build more accurate credit performance models in support of Freddie’s credit risk-sharing offerings.

According to Freddie, loan-level actual loss data will be added to its single-family loan-level historical dataset, which covers approximately 17 million 30-year, fixed-rate, single-family mortgages originated between January 1, 1999, and June 30, 2013.

Actual loss and monthly loan performance data, including credit performance information up to and including property disposition, is being disclosed through December 31, 2013, Freddie said.

"It is important for investors to have this expanded view of credit risk, especially as we continue to grow and evolve our credit risk offerings,” said Kevin Palmer, vice president of single-family strategic credit costing and structuring for Freddie Mac.

“Having data openly available in the marketplace allows us to expand the amount of risk transferred to private investors."

Throughout the year, Freddie and its GSE counterpart, Fannie Mae, have unveiled new forms of credit risk-sharing offerings in an attempt to offload some of risk currently held by Fannie and Freddie.

Through Freddie’s Structured Agency Credit Risk transactions, the GSE has offered up credit risk-sharing offerings in various forms, including high loan-to-value ratios.

Until breaking new ground in August, the previous Freddie STACR offerings were all supported by loans that carried loan-to-value ratios of between 61%-80%, with an average LTV of roughly 75%.

In the August deal, called STACR 2014-HQ1, Freddie offered up a deal supported by loans with LTV ratios of somewhere between 80% and 95%. The average LTV was 92% and the pool carried a balance of $9.975 billion, spread across 45,112 loans.

And in September, Freddie launched another high-LTV ratio deal, but that one was much larger than the first high-LTV offering. STACR 2014-HQ2 carried an unpaid principal balance of $33.43 billion and a weighted average LTV of 91.6%.

Palmer said that Freddie expects to introduce an actual loss credit offering in its ACIS and STACR programs in 2015. “We are releasing this data now to give potential credit investors sufficient time to get familiar with Freddie Mac's actual loss performance,” Palmer said.

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