Freddie Mac is marketing another $1 billion of securities transferring credit risk on a $35.7 billion pool of mortgages held in MBS that it insures.
Structured Agency Credit Risk notes are general obligations of Freddie Mac, but they act like credit-linked notes because repayment is subject to the performance of the reference pool of loans, in this case 144,144 high-quality loans acquired by the company between April and June 2015.
Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities LLC are the lead managers.
The Series 2016-DNA1 will issue three tranches of 12.5-year notes with preliminary ratings from Fitch Ratings. The $252 million M1 tranche is rated ‘BBB,’ the $240 million M2 tranche is rated ‘BBB-,’ and the $468.00 million M3 tranche is rated ‘B.’
This will be Freddie Mac’s sixth STAC transaction in which noteholders will bear actual losses realized when a repossessed home is sold, as opposed to losses modeled when loans become delinquent for more than 180 days.
The pool consists of loans with original loan-to-value ratios (LTVs) of over 60% and less than or equal to 80% with a weighted average (WA) original combined LTV of 76%, nearly identical to Freddie Mac’s previous STACR, completed in November 2015. The WA debt-to-income (DTI) ratio of 35% and credit score of 754.
Similar to Freddie’s previous STACR, the top three originators of loans in the pool are Wells Fargo (12%), US Bank (6%), and Bank of America (4%).