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Investments

Freddie Mac announces pricing for first actual loss high-LTV risk-sharing deal

STACR 2015-HQA1 featured loans with 80-95% loan-to-value ratio

Freddie Mac announced the pricing for its latest offering in its Structured Agency Credit Risk Series, with its first risk-sharing offering that features the actual loss position on loans with loan-to-value ratios ranging from 80% to 95%.

STACR 2015-HQA1 was a $872 million offering from Freddie Mac as part of its STACR series, which is designed to alleviate the risk to American taxpayers by offloading some of Freddie Mac’s credit risk onto investors.

STACR 2015-HQA1 was Freddie Mac’s third transaction where losses were to be allocated based on the actual losses realized on the related reference obligations instead of allocating losses using a fixed severity approach, and the first where the actual loss was offered on loans with high LTVs.

And according to Mike Reynolds, Freddie Mac’s vice president of credit risk transfer, the deal was welcomed by the market.

“Our HQA offering is the first STACR offering after the summer break, and was well received by investors,” Reynolds said. “The STACR market continues to build momentum and attract new capital.”

With STACR 2015-HQA1, Freddie Mac is issuing 100 basis points of first loss. 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.

According to Freddie Mac, the pricing for STACR 2015-HQA1was:

  • M-1 class priced at one-month LIBOR plus a spread of 125 basis points
  • M-2 class priced at one month LIBOR plus a spread of 265 basis points
  • M-3 class priced at one month LIBOR plus a spread of 470 basis points
  • B class priced at one month LIBOR plus a spread of 880 basis points

STACR 2015-HQA1 has a reference pool of single-family mortgages with an unpaid principal balance of more than $19 billion.

The reference pool consists of a subset of 30-year fixed-rate single-family mortgages acquired by Freddie Mac between Aug. 1, 2014, and Nov. 30, 2014, with LTVs from 80% to 95%.

Bank of America Merrill Lynch and Nomura served as co-lead managers and joint bookrunners. Deutsche Bank and BNP Paribas were co-managers, and Williams Capital was a selling group member, Freddie Mac said.

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