Page 59 - July-August 2018 GSE Report Flip Book

FREDDIE MAC
JJUALN. U- ARUYG. 22001188
“Freddie Mac’s transformation continued in the second quarter, with good business results
and similarly good financial performance. In business operations, our guarantee book grew significantly, credit quality was high, and we are generating a consistent stream of new innovations for our customers,” said Freddie Mac CEO Donald H. Layton. “On the financial side, we produced strong earnings with a growing track record of quarterly stability. These together provide the foundation necessary so Freddie Mac can effectively deliver on all aspects of its mission and, more broadly, improve America’s housing finance system.” (Press Release, Freddie Mac, 07/31/18; Form 10Q, Freddie Mac, 07/17/18)
Freddie Mac continues its efforts to de-risk its balance sheet
On August 1, Freddie Mac announced it had obtained a new insurance policy under the Agency Credit Insurance Structure. This new policy, ACIS 2018-DNA2, provides a maximum limit of up to $356 million of losses on a $49.3 billion reference pool of fixed rate mortgages with an original term of 241 to 360 months, acquired by Freddie between August 1, 2017 and November 30. 2017 or between November 1, 2016 and March 31, 2017. Freddie Mac has placed nearly $10.3 billion in insurance coverage through 38 ACIS transactions, which represents a significant portion of the $38 billion—and growing—cumulative credit loss exposure Freddie Mac has laid off to date. (Press Release, Freddie Mac, 08/01/18)
On August 10, Freddie Mac priced third Seasoned Credit Risk Transfer Trust (SCRT) of the year of approximately $2.3 billion securitization of re-performing loans, including $2.3 billion of guaranteed senior securities and $180 million in unguaranteed subordinate securities. The collateral backing these certificates are 11,716 fixed- and step-rate modified seasoned re-performing loans. This transaction closed in mid-August. (Press Release, Freddie Mac, 08/10/18)
On August 22, Freddie Mac announced the sale of approximate $1.45 billion Seasoned Loans Structured Transaction (SLST) of a pool of seasoned re-performing loans—the fifth SLST sale
of the program. The seasoned re-performing loan pool is primarily comprised of loans that were modified to assist borrowers who were at risk of foreclosure to help them keep their homes, which are re-performing and moderately delinquent loans.
This SLST transaction involves a two-step process. First, an auction of the right to purchase the subordinate non-guaranteed certificates is conducted via a competitive bidding process, subject to the terms set forth in a securitization term sheet. The winning bidder will be chosen on the basis of economics, subject to meeting Freddie Mac’s internal reserve levels. In the second step, Freddie Mac will create a trust to securitize the loans and issue both senior and subordinate certificates. Freddie Mac will guarantee, and may initially retain the guaranteed security issued from such securitization. The winner of the auction will purchase the subordinate certificates at closing.
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