Freddie Mac opens 2022 with two large CRT offerings

The credit-risk transfer transactions are the first step toward a $25 billion note-issuance goal for the year

Freddie Mac recently announced that its credit-risk transfer (CRT) program is projecting note-issuance volume of at least $25 billion in 2022. The government-sponsored enterprise (GSE) has made its first down-payment on that projection by issuing two single-family CRT note offerings totaling $3.3 billion so far this year that are secured by reference loan pools valued at $78.6 billion. 

Both CRT offerings were issued through Freddie’s Structured Agency Credit Risk (STACR) program. The initial deal closed on January 29 and the second offering is slated to close on February 11, according to Kroll Bond Rating Agency’s presale reviews of the STACR securitizations.

STACR 2022-DNA1 involves a $1.4 billion note issued against a reference loan pool of 190,774 residential mortgages with an outstanding principal balance of $33.6 billion. In the second offering, STACR 2022-DNA2, Freddie is issuing a $1.9 billion note against a reference pool of 143,889 single-family mortgages valued at about $45 billion. 

Through Freddie Mac’s STACR CRT transactions, private investors participate with the agency in sharing a portion of the mortgage credit risk in the reference loan pools retained by the GSE. Investors receive principal and interest payments on the STACR notes they purchase, but if credit losses exceed a predefined threshold per the security issued, then investors are responsible for absorbing the losses exceeding that mark. 

The leading originators for the loan pool in the first STACR offering of 2022, according to KBRA’s report, were United Wholesale Mortgage (UWM), 7%; Newrez LLC, 7%; Rocket Mortgage, 6.6%; Pennymac, 6.3%; J.P. Morgan Chase, 5.9%; and “other,” 67.2%

UWM also was the leading originator in the second STACR deal of 2022, at 9.1% of the loan pool. Rocket Mortgage also made a showing, at 8.3%, followed by Wells Fargo, 6.1%; JPMorgan Chase, 5.9%; Newrez, 5%; and other, 65.7%

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Freddie Mac’s CRT program was founded with its issuance of the first STACR notes in July 2013. Freddie’s other single-family CRT program, the Agency Credit Insurance Structure (ACIS) program, shares risk with re-insurance companies. It was introduced in November 2013. 

“Freddie Mac’s Single-Family credit-risk transfer programs transfer credit risk away from U.S. taxpayers to global private capital via securities and re-insurance policies, providing stability, liquidity and affordability to the U.S. housing market,” Freddie Mac states in a press release.

Freddie Mac issued more than $18 billion in CRT notes across 10 STACR and 11 ACIS deals in 2021, according to the agency. 

Freddie’s counterpart, Fannie Mae, expects to issue about $15 billion in notes through Connecticut Avenue Securities real estate mortgage investment conduit in 2022, according to Devang Doshi, Fannie’s senior vice president of single-family capital markets.

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