Investments

Freddie Mac back with new high-LTV risk-sharing mortgage bond

STACR 2015-HQ2 features loans with 80-95% loan-to-value ratio

Freddie Mac is back in the market with its fourth risk-sharing deal of the year, as the government-sponsored enterprise continues in its push to alleviate the risk to the American taxpayers.

Earlier this year, Freddie brought its first high loan-to-value ratio risk-sharing deal to market in the form of Structured Agency Credit Risk Series 2015-HQ1, which had loans with LTVs from 80-95% and offered debt notes of $725 million.

Now, Freddie is bringing another high-LTV risk-sharing bond to market. STACR 2015-HQ2 is backed by a reference pool of 30-year fixed-rate single-family mortgages acquired by Freddie Mac in the first through third quarters of 2013, with LTVs from 80-95%, Freddie said.

Through STACR 2015-HQ2, Freddie will offer debt notes of $425.6 million, pending market conditions. STACR 2015-HQ2’s reference pool carries an unpaid principal balance of more than $30.3 billion.

With STACR 2015-HQ2, Freddie Mac is issuing 100 basis points of first loss and rating the M-3 bond, the GSE said. Freddie Mac will hold the senior loss risk in the capital structure and a portion of the risk in the Class M-1, M-2 and M-3, and the first loss Class B tranche.

Earlier this year, Freddie began offering investors the opportunity to buy the first-loss position and actual-loss position as part of its STACR offerings, but STACR 2015-HQ2 is fixed severity, not actual loss, Freddie said.

"This is our fourth STACR offering out of an expected six to eight this year," said Mike Reynolds, Freddie Mac vice president of credit risk transfer. "STACR has gained momentum in the market so far this year, and we hope to continue to see new investor participation in each transaction."

Barclays and Nomura will serve as co-lead managers and joint bookrunners. BNP Paribas and Morgan Stanley are co-managers, and Multi-Bank Securities is a selling group member, Freddie said.

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