Freddie Mac latest risk-sharing transaction is looks a lot like a private label mortgage backed security.  

The first Whole Loan Security (WLS), an offering of approximately $300 million of guaranteed senior and unguaranteed subordinate actual loss securities, priced Thursday.  The unguaranteed portion was unrated. But Freddie is planning regular, quarterly issuance, and will consider obtaining a rating for the unguaranteed portions of future deals.

By shifting some of its credit risk from the underlying mortgages to subordinate investors, WLS compliments the Freddie Mac award-wining and innovative Structured Agency Credit Risk (STACR) and Agency Credit Insurance Structure (ACIS) offerings, and continues the company's path to selling a portion of its credit risk.

Freddie Mac Whole Loan Securities Trust, Series 2015 SC01 will issue approximately $278 million in guaranteed senior certificates and approximately $23 million in unguaranteed subordinate certificates. The collateral backing the certificates is 574 fixed-rate super conforming loans originated in the fourth quarter of 2014 and the first quarter of 2015.

Credit Suisse is the left lead manager and sole bookrunner. BofA Merrill Lynch is co-lead manager; Barclays is co-manager; and CastleOak Securities is a selling group member.

The deal is expected to settle later this month.

"WLS represents another important capability to transfer credit risk,” said Kevin Palmer, vice president of Freddie Mac Single-Family strategic credit costing and structuring. “We believe this offering will be especially attractive to certain private capital participants that prefer a cash securitization."

Palmer added, "Cash securitizations were the primary way the industry transferred credit risk in the mortgage market pre-crisis, but post crisis this market has been nearly dormant. We believe the WLS addresses some of the key concerns that investors experienced during the financial crisis, such as ensuring there is an active risk manager like Freddie Mac who can adapt mortgage servicing requirements to meet changing market conditions. We are pleased with the market response to this initial WLS offering. We expect to have regular WLS issuances." 

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