Freddie Mac prices reperforming loan CRT, makes offer on STACR notes

Freddie Mac has priced its first seasoned credit risk transfer transaction of 2024, consisting of approximately $618 million guaranteed senior and non-guaranteed subordinate securities backed by a pool of reperforming loans.

This program involves mortgages previously in Freddie Mac securitizations or owned by the company as whole loans that went into default. The majority have been modified, either through the Home Affordable Modification Program or another program. They have been performing for six months or longer, but they may include some forborne unpaid principal balance.

Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2024-1 consists of 3,635 seasoned fixed-rate, step-rate and adjustable rate reperforming mortgages in approximately $585 million of guaranteed senior certificates and $32 million in non-guaranteed mezzanine and subordinate certificates. The transaction is expected to settle on March 14.

On the closing date, the trust could include loans that are less than 30 days late on the scheduled payment.

Select Portfolio Servicing and Specialized Loan Servicing are the servicers for the loans in the transaction. In the event of default, the servicers will prioritize borrower retention options and promote neighborhood stability, Freddie Mac said.

In 2023, Freddie Mac only did one of these SCRT transactions, but in 2020 and 2021 the GSE made three issuances and between 2017 and 2019, it had four of these offerings in each year.

To date, it has sold over $10.2 billion of non-performing loans as well as securitized approximately $78 billion of RPLs broken down into over $30 billion of fully guaranteed Participation Certificates, $35 billion of SCRT senior/sub securities, and $12 billion of Seasoned Loans Structured Transaction securitizations.

In other credit risk transfer news from Freddie Mac, the GSE started a fixed-price cash tender offer to repurchase several classes of Structured Agency Credit Risk (STACR) notes, which transfer a portion of the risk of default on loans Freddie has securitized.

Freddie Mac is looking to manage its costs by repurchasing STACR notes that have substantially deleveraged due to decreases in credit risk of related reference pools and increases in credit enhancements to STACR securities. As a result, these no longer provide Freddie Mac with an economically sensible means of transferring credit risk, an FAQ on the agency's website said.

B of A Securities and Nomura Securities International are the lead dealer managers with Academy Securities as co-dealer manager. The offer expires at 5 p.m. eastern time on March 12.

The securities covered by the tender offer are: STACR 2017-DNA2 B-1; STACR 2018-DNA3 B-1; STACR 2019-DNA4 B-1; STACR 2019-FTR2 B-1; STACR 2019-HQA1 B-1; STACR 2019-HQA3 B-1; STACR 2019-HQA4 B-1; STACR 2019-HRP1 M-3; STACR 2020-DNA3 B-1; STACR 2020-DNA5 M-2; STACR 2020-DNA6 M-2; STACR 2020-HQA3 B-1; and STACR 2020-HQA5 M-2.

The tender offer consideration is based on the original principal amount of each class of notes and thus varies.