Freddie Mac Prices Two STACR Credit Risk Sharing Transactions

MCLEAN, VA--(Marketwired - Oct 23, 2014) - Freddie Mac (OTCQB: FMCC) priced two Structured Agency Credit Risk (STACR®) transactions today totaling $1 billion. The company priced a $611 million offering of STACR debt notes, Series 2014-DN4, and a $429 million offering of STACR debt notes, Series 2014-HQ3 with a reference pool of loans with higher loan-to-value (LTV) ratios. These offerings represent the sixth and seventh STACR offerings this year where Freddie Mac transfers a portion of its credit risk on certain groups of loans to private investors.

"Credit risk sharing is a top priority at Freddie Mac," said Kevin Palmer, vice president of single-family strategic credit costing and structuring for Freddie Mac. "We are happy to see such strong demand for STACR bonds especially given last week's market volatility."

When these transactions settle, the company will have issued $6 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 $205 billion UPB in single-family mortgages.

STACR Debt Notes, Series 2014-DN4 and Series 2014-HQ3 were offered to the market by Bank of America Merrill Lynch and J.P. Morgan as co-lead managers and joint bookrunners. Citigroup, Deutsche Bank Securities and Wells Fargo Securities served as co-managers, and Bonwick Capital as selling group member. These transactions will be listed on the Global Exchange Market of the Irish Stock Exchange and have indicative regulatory assessment designations from the National Association of Insurance Commissioners.

STACR, Series 2014-DN4

Pricing for the STACR Series 2014-DN4, M-1 class was one-month LIBOR plus a spread of 140 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 455 basis points. The offering is scheduled to settle on or around October 28, 2014.

The Series 2014-DN4, M-1 class has 4.2% 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 2.9% 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 .50% 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.