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Freddie Mac announces settlement of Seasoned Credit Risk Transfer offering

Transfers $1.12 billion in risk

Freddie Mac announced on Wednesday the settlement of its second Seasoned Credit Risk Transfer (SCRT) offering, shifting even more credit risk to investors as part of a plan to reduce the overall risk of the government-sponsored enterprises.

The settlement also follows a greater initiative to reduce the risk for American taxpayers.

The credit risk transfer is made up of a rated, securitization of approximately $1.12 billion of both guaranteed senior and unguaranteed subordinate securities.

Additionally, the collateral backing the certificates are 4,361 fixed- and step-rate modified seasoned loans. These loans were modified to assist borrowers who were at risk of foreclosure to help them keep their homes and have all been performing for at least 12 months as of issuance, the announcement stated.

Freddie Mac explained that the SCRT securitization program is a key part of its “seasoned loan offerings to reduce less liquid assets in its mortgage-related investments portfolio and shed credit and market risk via economically reasonable transactions.”

According to the announcement, Select Portfolio Servicing will service the loans.

Freddie noted that the servicing of the loans will be in accordance with requirements similar to those applicable to the sale of non-performing loans, which prioritize borrower retention options in the event of a default and promote neighborhood stability.

So far, Freddie Mac has sold $7 billion in nonperforming loans, securitized $26 billion in re-performing loans, and transacted $2 billion in structured offerings. 

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