Freddie Mac Resumes Risk Sharing in 2016 Where Last Year Left Off

freddiemacFreddie Mac’s Structured Agency Credit Risk (STACR) series, which began in mid-2013 as a way to reduce the Enterprise’s exposure to credit risk and bring private investors back into the single-family mortgage market, has picked up in 2016 right where it left off in 2015.

According to a press release issued on Tuesday, Freddie Mac has announced its intention to sell its first STACR debt notes offering of 2016, STACR Series 2016-DNA1, which is valued at $996 million. It is the 17th STACR offering since the program began two and a half years ago.

The offering consists of a reference pool of recently acquired single-family mortgages with an unpaid principal balance (UPB) totaling about $35.7 billion, according to Freddie Mac. The transaction is scheduled to settle on January 21, 2016.

“We have demonstrated our ability to execute credit risk transactions on a regular basis with a standard structure and have been transparent in our disclosures,” said Mike Reynolds, Freddie Mac vice president of Credit Risk Transfer. “Our loans are subject to Freddie Mac’s underwriting standards, internal fraud prevention and quality control review process. We are finding with each issuance that STACR is more diverse, liquid and durable.”

1-5 Freddie Mac TableThe 17 STACR offerings, combined with two Whole Loan Security (WLS) offerings and 14 Agency Credit Insurance Structure (ACIS) transactions, has resulted in the transferring of a substantial portion of credit risk on more than $385 billion of UPB in single-family mortgages backed by Freddie Mac.

Freddie Mac was the first agency to market credit risk transfer transactions through STACR, WLS, and ACIS programs. In two and a half years, Freddie Mac’s investor base has grown to include approximately 190 unique investors, which includes reinsurers.

Freddie Mac’s fellow GSE, Fannie Mae, has followed Freddie Mac’s lead for credit risk transfer with two programs, the Connecticut Avenue Securities (CAS) Series and the Credit Insurance Risk Transfer (CIRT) program. Through six CIRT transactions since the program’s inception in 2014, Fannie Mae has acquired more than $1.2 billion of coverage on more than $46 billion of loans. Through the CAS Series, Fannie Mae has sold more than $12.4 billion in securities to private investors, which covers $438 billion worth of mortgage loans since the program’s inception in September 2013.

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