Freddie Mac offering second actual loss STACR deal

Previous risk-sharing deal upsized after strong market demand

After market demand caused Freddie Mac to increase the size of its first Structured Agency Credit Risk series offering featuring actual loss positions, Freddie Mac is now offering a new actual loss STACR deal.

STACR Series 2015-DNA2 features debt notes of $950 million although the deal could be increased pending market conditions.

In April, STACR Series 2015-DNA1 was upsized from $720 million to $1.01 billion due to market demand. 

The STACR Series 2015-DNA2 offering is the Freddie Mac’s second transaction where losses will be allocated based on the actual losses realized on the related reference obligations instead of allocating losses using a fixed severity approach.

STACR Series 2015-DNA2 has a reference pool of single-family mortgages originated August through November 2014 with an unpaid principal balance of more than $31.9 billion, Freddie Mac said.

Under the deal’s structure, Freddie Mac holds the senior loss risk in the reference pool, and a portion of the risk in the Class M-1, M-2, M-3 and the first loss Class B tranche. Kroll Bond Ratings Agency and Moody's Investors Service are expected to rate the M-1, M-2, M-3 and MACR classes, Freddie said.

"We see actual loss-based risk transfer as more sustainable over the long run than calculated loss risk transfer deals, and we are very happy with the initial positive demand from investors," Mike Reynolds, Freddie Mac vice president of credit risk transfer, said earlier this year. "We look forward to integrating actual loss into future transactions."

In total, Freddie Mac has brought 13 STACR risk-sharing deals to market, and STACR Series 2015-DNA2 is Freddie’s fifth STACR deal of 2015. Through its various credit risk-sharing structures, Freddie Mac has laid off a portion of credit risk on more than $281 billion of unpaid principal balance in single-family mortgages, representing more than one million loans.

Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities LLC will serve as co-lead managers and joint bookrunners, Freddie Mac said. Deutsche Bank Securities Inc. and Jefferies LLC are co-managers, and Great Pacific Securities is a selling group member.

According to Freddie Mac, the offering is scheduled to settle on or around June 29, 2015.

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