Credit risk

Freddie Mac to Increase Credit Risk Transfer Securitizations in 2022


Freddie Mac is stepping up its credit risk transfer business this year, announcing plans to increase issuance by $ 7 billion while also offering two new tranches to the quality tranche due to increased interest in the product.

In 2022, the government-sponsored company is forecasting $ 25 billion in total issuance, mostly through the Structured Agency Credit Risk and Agency Credit Insurance Structure programs.

The increase in staff was expected by the markets, given previous announcements from the Federal Housing Finance Agency which signaled a change in direction from the Trump administration’s stance on programs.

In 2021, Freddie Mac completed $ 18 billion in CRT transactions (10 STACR and 11 ACIS). A change in the regulatory capital framework in November 2020 by then FHFA Director Mark Calabria played a role in reduce the use of the cathode ray tube by Freddie Mac and prevented Fannie Mae from fully re-entering that market following a suspension related to the March 2020 pandemic.

Revisions proposed to the executive by the current Acting Director Sandra Thompson – thereafter appointed by President Biden full time position – reopened this channel last fall.

“Freddie Mac meets the capital requirements set by the Enterprise Regulatory Capital Framework with plans to optimize our CRT offerings in 2022,” said Mike Reynolds, vice president of single-family CRT, in a press release. “We are expecting a banner year for STACR and ACIS.”

As part of its STACR 2022 on-the-fly offerings, Freddie Mac is adding two slices to the M-1 slice.

“We anticipate a market for M-1A and M-1B, as well as the M-2 tranche among sophisticated buyers looking for quality agency risk opportunities,” said Reynolds. “This can be of particular interest to investors who expect to profit from any STACR buyout in 2022 and who are looking for a way to redeploy their capital.”

In particular, the M-1A tranche could bring new capital into the CRT program, he continued. BTIG analysts agreed that the potential market for the products is large.

“We believe that GSEs will have considerable lead in increasing and expanding CRT’s offerings, which could include transferring larger risk tranches, removing more of the subordinate risk through the structure and / or relaunch of lenders’ risk-sharing transactions, “Jan. 3 said. noted the report by BTIG Policy Research Director Isaac Boltansky.

The new issues are expected to be offset by $ 15 billion in exercised note repayments, repurchases and call options.

Last year, Freddie Mac made his very first take-over bid for STACR tickets. The Company was able to withdraw $ 1.6 billion from the original principal balance of the Notes which had deleveraged significantly due to the decreased credit risk of the related Reference Pools and the increased credit enhancement of the STACR Securities. . These notes no longer provided Freddie Mac with an economically reasonable way to transfer credit risk.

Thompson’s revisions brought Fannie Mae back to CRT show in October.

Fannie Mae plans to issue $ 15 billion of REMIC issues in Connecticut Avenue Securities this year, depending on market conditions, said Devang Doshi, senior vice president of single-family home capital markets, in a statement. December press release. Its most recent agreement, in early December, was for $ 1.2 billion in credit insurance risk transfer program notes.