Freddie Mac is prepping its next risk-sharing deal, according to presales from Fitch Ratings and Kroll Bond Ratings.
Totaling $590 million, STACR 2015-HQA2 is linked to the performance of a $17.1 billion pool of 74,432 residential mortgages. All the loans have 30-year terms and are fixed rate.
Risk-sharing deals are ways for Freddie and its twin Fannie Mae to offload the credit risk of mortgages they've acquired or guaranteed. In effect, they act as a reinsurance.
The highest rated tranches in the multi-tranche deal has an ‘A-’ from Fitch and an ‘A’ from Kroll.
The transaction is the second from Freddie that has actual loss exposure and loans with loan-to-value (LTV) ratios over 80%.
The weighted average (WA) LTV of the referenced mortgages is 91.5%, with none exceeding 95%.
Freddie’s first actual loss deal came out earlier this year. This approach gives investors exposure to the actual losses on the referenced residential mortgages as opposed to expected losses based on “fixed severity.” In that approach - used for the first STACR deals - investors would take a hit once loans were delinquent for more than 180s days. Exposing investors to actual losses is designed to make STACR notes perform more like private-label residential mortgage backed securities, an asset class that once formed a pillar of the securitization market but remains nowhere close to its pre-crisis volumes.
The weighted average (WA) FICO credit score of the borrowers in the reference pool of STACR 2015-HQA2 is 749. The deal is Freddie’s 17th STACR.