Spreads widened on Freddie Mac’s latest offering of Structured Agency Credit Risk securities as investors demanded additional compensation for taking on the credit risk of mortgages insured by the company.

The $996 million of STACR Series 2016-DNA1 are general obligations of Freddie Mac, but their performance is linked to a pool of recently-acquired single-family mortgages with an unpaid principal balance of more than $35.7 billion.

The pool consists of loans with original loan-to-value ratios of over 60% and less than or equal to 80% with a weighted average original combined LTV of 76%, nearly identical to Freddie Mac’s previous STACR, completed in November 2015. The WA debt-to-income ratio of 35% and credit score of 754.

Pricing on the M-1 class, which is rated ‘BBB’ by Fitch Ratings, is 145 basis points over one-month LIBOR; 30 basis points wide of the comparable tranche of Freddie’s previous transaction, completed in November.

The  ‘BBB-‘ rated M-2 class pays 290 basis points over LIBOR, 10 basis points wide of the comparable tranche of the previous deal.

The B rated M-3 class pays 555 basis points, 75 basis points wide of the M-3 tranche of the previous deal.

But the unrated B class, which is exposed to the first dollar of losses sustained on the reference pool, was 1,000 basis points over LIBOR, 50 basis points narrower than the B tranche of the previous deal.

As with previous STACR offerings, Freddie Mac holds the senior loss risk in the capital structure, and a portion of the risk in the Class M-1, M-2, M-3, and B Bonds.

Bank of America Merrill Lynch and J.P. Morgan are co-lead managers and joint bookrunners. Barclays, Citigroup, Credit Suisse and Wells Fargo are co-managers, and Williams Capital is a selling group member. The offering is scheduled to settle on or around January 21, 2016.

"With current market conditions we are pleased to sell a billion dollars of credit bonds and believe it reflects investors' positive view of the company's credit fundamentals," Mike Reynolds, Freddie mac’s vice president of credit risk transfer, said in a press release.

The company has said it expects to conduct eight STACR offerings through October of this year.

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