Investments

Latest Freddie Mac high-LTV risk-sharing mortgage bond prices tight

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

Freddie Mac announced the pricing of its second high loan-to-value risk-sharing bond of 2015, which is supported by loans with LTV ratios of 80-95%.

According to Freddie Mac, the investor response to Structured Agency Credit Risk Series 2015-HQ2 was strong, and the deal priced tight compared with STACR Series 2015-HQ1.

STACR Series 2015-HQ1 priced at one-month LIBOR plus a spread of 105 basis points for the M-1 class. Pricing for the M-2 class was one month LIBOR plus a spread of 220 basis points. Pricing for the M-3 class was one month LIBOR plus a spread of 380 basis points. Pricing for the B class was one month LIBOR plus a spread of 1075 basis points.

While STACR Series 2015-HQ2 priced its M-1 class at one-month LIBOR plus a spread of 110 basis points. The M-2 class priced at one month LIBOR plus a spread of 195 basis points. The M-3 class priced at one month LIBOR plus a spread of 325 basis points. And the B class priced one month LIBOR plus a spread of 795 basis points.

"This transaction went smoothly and investor demand was strong,” said Mike Reynolds, Freddie Mac vice president of credit risk transfer. “The B class spreads were the tightest to date for STACR, which is a positive sign as we continue to grow this new asset class.”

For STACR Series 2015-HQ2, Freddie Mac is issuing 100 basis points of first loss and rating the M-3 bond. Freddie Mac holds 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.

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.

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," Reynolds said when Freddie Mac announced the deal. "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 served as co-lead managers and joint bookrunners. BNP Paribas and Morgan Stanley were co-managers, and Multi-Bank Securities is a selling group member, Freddie said.

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