SOURCE: Freddie Mac

Freddie Mac

September 10, 2014 16:13 ET

Freddie Mac Prices New STACR HQ2 Credit Risk Sharing Transaction of Higher LTV Loans

MCLEAN, VA--(Marketwired - Sep 10, 2014) - Freddie Mac (OTCQB: FMCC) priced a new Structured Agency Credit Risk (STACR®) transaction today totaling $770 million. This STACR Series 2014-HQ2 represents the fifth STACR offering this year where Freddie Mac is transferring a portion of its credit risk on certain groups of loans to private investors. Freddie Mac completed its first HQ Series transaction last month of loans with LTVs of above 80% and up to 95%.

Pricing for the STACR Series 2014-HQ2 M-1 class was one-month LIBOR plus a spread of 145 basis points. Pricing for the M-2 class was one month LIBOR plus a spread of 220 basis points. Pricing for the M-3 class was one month LIBOR plus a spread of 375 basis points. The offering is scheduled to settle on or around September 15, 2014.

STACR Debt Notes, Series 2014-HQ2 were offered to the market by Barclays and RBS Securities as co-lead managers and joint bookrunners. J.P. Morgan, Credit Suisse and Bank of America Selling Group served as co-managers, and Bonwick Capital as a selling group member.

"We continue to make STACR more appealing to a broader investor base. We listed the STACR bonds on the Global Exchange Market of the Irish Stock Exchange and have preliminary designations of credit quality from the National Association of Insurance Commissioners for all three HQ2 bonds," said Kevin Palmer, vice president of single-family strategic credit costing and structuring for Freddie Mac. "This offering builds on the STACR platform and shows the flexibility Freddie Mac has as an issuer as we are selling only the HQ Series collateral in this offering for the first time instead of doing it at the same time as our STACR DN Series."

The NAIC preliminary designations are NAIC2 for the M-1 class, NAIC4 for the M-2 and M-3 classes.

The Series 2014-HQ2, M-1 class has 4.1% subordination and received investment grade ratings of A-(sf) from Fitch and A2(sf) from Moody's, subject to ongoing monitoring. The M-2 class has 2.25% 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 .60% subordination. The M-1, M-2 and M-3 Classes of the Series 2014-HQ2 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-HQ2, 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 147,000 residential loans, representing an unpaid principal balance of more than $34 billion. This pool consists of a subset of 30-year fixed-rate single-family mortgages acquired by Freddie Mac in the first through third quarters 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.

When this transaction settles, the company will have issued $5 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 $182 billion UPB in single-family mortgages.

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 and the SEC's Web site at

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, Twitter @FreddieMac and Freddie Mac's blog