Investors continue to demand additional compensation for taking on the credit risk of mortgages insured by Freddie Mac.

The company priced its second offering of Structured Agency Credit Risk (STACR) transaction Tuesday, and yield spreads of most tranches widened from levels on the first deal of the year, completed in January.

The $475 million Series 2016-HQA1 are general obligations of Freddie Mac, but their performance is linked to a pool of single-family mortgages with an unpaid principal balance of more than $17.5 billion. The reference pool consists of a subset of 30-year fixed-rate single-family mortgages acquired by Freddie Mac between April 1, 2015 and June 30, 2015.

Pricing on the M-1 class, rated ‘BBB’ by Fitch Ratings, was one-month LIBOR plus a spread of 175 basis points; that was 30 basis points wide of the comparable tranche of the previous deal.

The M-2 class, rated ‘BBB-‘ by Fitch, pays one-month LIBOR plus 275 basis points, 15 basis points inside the previous deal.

The M-3 class, rated ‘B’ by Fitch, was one-month LIBOR plus a spread of 635 basis points, compared with 555 basis points on the same tranche of the January deal.

The unrated B class pays one-month LIBOR plus 1,275 basis points, compared with 1000 basis points on the previous deal.

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

In a press release, Mike Reynolds, vice president of Credit Risk Transfer for Freddie Mac, said that spreads on the deal have since tightening in trading in the secondary market. "This may be the reversal of spreads widening," he said

Barclays and Wells Fargo Securities are co-lead managers and joint bookrunners. Cantor Fitzgerald, Deutsche Bank Securities, J.P. Morgan and Nomura are co-managers. Ramirez and Co. is the selling group member. 

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.