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Yesterday, Freddie Mac announced that it is doing something that it has never done in the past— offering investors actual losses on mortgages. Earlier this year, the government-sponsored enterprise made first-loss position available to investors as a part of its Structured Agency Credit Risk Series, but this new offering makes for some exciting new changes.
According to Freddie Mac,“the actual loss STACR offering will be similar to recent STACR deals, however, instead of allocating losses to the debt notes based upon a fixed severity approach, losses will be allocated in this transaction based on the actual losses realized on the related reference obligations.”
Freddie Mac plans to market its actual losses plan on April 13, 2015.
Freddie Mac’s Vice President of Credit Risk Transfer, Mike Reynolds said in a statement that the company is looking forward to implementing this new feature.”We think the market of the future, where increasing amounts of credit risk will be transferred to private investors, will be actual loss based and we are excited to begin that transition with the next STACR offering,” Reynolds said.
Freddie made it known that it provided investors with “loan level loss data”in November 2014. At that time,Freddie Mac reported it was making the data available to help investors build more factual credit performance models in lieu of the risk-sharing offerings Freddie Mac previously provided .
In its single-family loan-level historical database, loan-level loss data was added and it encompasses about 17 million 30-year, fixed-rate, single-family mortgages that took place between Jan 1, 1999 and June 30, 2013.
If you’re looking for Freddie Mac’s historical loan-level database,you can find it on http://www.freddiemac.com. The database has also been updated to cover specific loan-level actual loss data points. According to Freddie Mac, Credit Suisse will be acting as structuring lead manager, along with Citigroup as the joint book runner and co-lead manager.
It should be noted that Freddie Mac’s announcement is not an offer to sell any of Freddie Mac’s securities.
Freddie Mac originated in 1970 with the purpose of providing stability, liquidity and affordability to the U.S. residential mortgage markets. Freddie Mac provides mortgage capital for investors within the U.S. Freddie works with a national network of mortgage lending customers and cater to these three business lines: a Multifamily business for apartment financing, a Single Family Credit Guarantee business for home loans, and an investment portfolio.