Freddie Mac Prices Two New STACR Credit Risk Sharing Transactions, Including a New Higher LTV Series


MCLEAN, VA--(Marketwired - Aug 6, 2014) - Freddie Mac (OTCQB: FMCC) priced two Structured Agency Credit Risk (STACR®) transactions today totaling $1.1 billion. The company priced a $672 million offering of STACR debt notes, Series 2014-DN3, and a $460 million offering of the new STACR-HQ1 series with a reference pool of loans with higher loan-to-value (LTV) ratios. These offerings represent the third and fourth STACR offerings this year where Freddie Mac transfers a portion of its credit risk on certain groups of loans to private investors.

When these transactions settle, the company will have issued $4.2 billion of STACR debt notes and obtained insurance coverage through ACIS (Agency Credit Insurance Structure) reinsurance transactions of $631 million since they were launched last year. Through these credit risk transfer transactions, the company will have laid off a substantial portion of the credit risk on $148 billion UPB in Single-Family mortgages.

Kevin Palmer, vice president of single-family strategic credit costing and structuring for Freddie Mac, said, "We are expanding our STACR product line with the HQ series of loans with LTVs of above 80% to 95%, and increasing the private market's participation in a segment of the housing market with lower down payment loans. The market is home purchase-oriented and the STACR HQ Series reflects this business volume which has higher LTV loans that adhere to our strong credit standards."

Palmer added, "We issued at a time of more market uncertainty than we've seen in recent months, and are now at overall levels closer to what we saw at the beginning of the year. We are working on expanding the investor base and are pleased to have over 80% of the bonds allocated to money managers, credit unions, insurance companies and pension funds."

STACR Debt Notes, Series 2014-DN3 and Series 2014-HQ1 were offered to the market by Barclays and RBS Securities as co-lead managers and joint bookrunners. Deutsche Bank Securities, J.P. Morgan and Wells Fargo Securities served as co-managers, and The Williams Capital Group, L.P. as a selling group member.

STACR 2014-DN3

Pricing for the STACR Series 2014-DN3, M-1 class was one-month LIBOR plus a spread of 135 basis points. Pricing for the M-2 class was one month LIBOR plus a spread of 240 basis points. Pricing for the M-3 class was one month LIBOR plus a spread of 400 basis points. The offering is scheduled to settle on or around August 11, 2014.

The Series 2014-DN3, M-1 class has 3.6% subordination and received an investment grade rating of A-(sf) from Fitch and A1(sf) from Moody's, subject to ongoing monitoring. The M-2 class has 2.4% subordination and received an investment grade rating of BBB-(sf) from Fitch and A3(sf) from Moody's, subject to ongoing monitoring. The M-3 class was not rated and has .40% subordination. The three classes have an exchangeable feature giving investors the option to either combine pro-rata portions of the cash flows from the M-1, M-2 and M-3 classes or strip off a portion of the interest from any class to create bonds with different margins.

For Series 2014-DN3, the amount of periodic principal and ultimate principal paid by Freddie Mac is determined by the performance of a very large and diversified reference pool of more than 87,000 residential loans, representing an unpaid principal balance of more than $19.7 billion. This pool consists of a subset of 30-year fixed-rate single-family mortgages acquired by Freddie Mac in the fourth quarter of 2013. Freddie Mac holds the senior risk and the first loss risk in the reference pool, and a portion of the risk in the M-1, M-2 and M-3 classes.

STACR, Series 2014-HQ1

Pricing for the STACR Series 2014-HQ1 M-1 class was one-month LIBOR plus a spread of 165 basis points. Pricing for the M-2 class was one month LIBOR plus a spread of 250 basis points. Pricing for the M-3 class was one month LIBOR plus a spread of 410 basis points. The offering is scheduled to settle on or around August 11, 2014.

The Series 2014-HQ1, M-1 class has 4.1% subordination and received investment grade ratings of and A-(sf) from Fitch and A2(sf) from Moody's, subject to ongoing monitoring. The M-2 class has 2.55% subordination and received investment grade ratings of BBB-(sf) from Fitch and Baa2(sf) from Moody's, subject to ongoing monitoring. The M-3 class was not rated and has .75% subordination. Similar to the Series 2014-DN3, the M-1, M-2 and M-3 Classes of the Series 2014-HQ1 have an exchangeable feature giving investors the option to either combine pro-rata portions of the cash flows from the M-1, M-2 and M-3 classes or strip off a portion of the interest from any class to create bonds with different margins.

For Series 2014-HQ1, the amount of periodic principal and ultimate principal paid by Freddie Mac is determined by the performance of a very large and diversified reference pool of more than 45,000 residential loans, representing an unpaid principal balance of approximately $10 billion. This pool consists of a subset of 30-year fixed-rate single-family mortgages acquired by Freddie Mac in the fourth quarter of 2013. Freddie Mac holds the senior risk and the first loss risk in the reference pool, and a portion of the risk in the M-1, M-2 and M-3 classes.

This announcement is not an offer to sell any Freddie Mac securities. Offers for any given security are made only through applicable offering circulars and related supplements, which incorporate Freddie Mac's Annual Report on Form 10-K for the year ended December 31, 2013, filed with the Securities and Exchange Commission (SEC) on February 27, 2014; all other reports Freddie Mac filed with the SEC pursuant to Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) since December 31, 2013, excluding any information "furnished" to the SEC on Form 8-K; and all documents that Freddie Mac files with the SEC pursuant to Sections 13(a), 13(c) or 14 of the Exchange Act, excluding any information "furnished" to the SEC on Form 8-K.

Freddie Mac's press releases sometimes contain forward-looking statements. A description of factors that could cause actual results to differ materially from the expectations expressed in these and other forward-looking statements can be found in the company's Annual Report on Form 10-K for the year ended December 31, 2013, and its reports on Form 10-Q and Form 8-K, filed with the SEC and available on the Investor Relations page of the company's Web site at www.FreddieMac.com/investors and the SEC's Web site at www.sec.gov.

Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation's residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Today Freddie Mac is making home possible for one in four home borrowers and is one of the largest sources of financing for multifamily housing. Additional information is available at FreddieMac.com, Twitter @FreddieMac and Freddie Mac's blog FreddieMac.com/blog.