Freddie Plans for First Actual-Loss HLTV Risk-Share Deal

Freddie Mac is making plans for its first risk-sharing transaction tied to actual losses on mortgages with higher loan-to-value ratios in the 80% to 95% range.

This would be Freddie's sixth Structured Agency Credit Risk deal of the year and the third tied directly to actual losses rather than those from a reference transaction.

Freddie also said it would be making preliminary payment disclosures on the fourth day of the month rather than the 25th.

"The STACR market is becoming more sensitive to prepayment speeds, and these changes provide investors with access to the information as soon as possible," said Mike Reynolds, Freddie Mac vice president of credit risk transfer, in a press release.

Both Freddie Mac and fellow government-sponsored enterprise Fannie Mae have been issuing risk-sharing deals, and Fitch in a report Monday finds their loss data is similar outside of loans originated before 2003 and after 2006. In these vintages, Fannie Mae losses appear to be lower than those of Freddie Mac.

"The data suggests differences between Fannie and Freddie loss severities among loans with similar profiles, and points to certain drivers," said Fitch director Sean Nelson in a press release. "However, there may be subtle compositional differences between the two data sets that influence the severities."

Fannie Mae enhanced its single-family residential loan-level historical dataset on July 22 by adding loan-level loss data. Fitch included this data in its analysis.

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