Freddie Mac is planning its fifth risk-sharing transaction of the year.
The $950 million Structured Agency Credit Risk Series 2015-DNA2 is the second transaction of the year that offers debt notes with exposure to actual losses of the mortgages that it ensures.
The STACR series transfer a portion of the credit risk on single-family loans to private investors; in this case, the performance of the Series 2015-DNA2 notes is linked to a pool of single-family mortgages acquired by Freddie between August 2014 and November 2014 with an unpaid principal balance over $31.9 billion.
Freddie has said STACR deals that offer exposure to actual losses on mortgages are more attractive to these investors.
But with the exception of STACR Series 2015-DNA1, all of the previous deals allocate losses using a "fixed severity" approach. This means that investors incur the loss when loans referenced in the pool are delinquent for more than 180 days. Once a loan is behind on payments for that long, they are assumed to be headed for default. A portion of the principal must be repaid subject to the typical loss severity on loans in the reference pool.
Merrill Lynch, Pierce, Fenner & Smith Inc. and JPMorgan Securities are joint bookrunners on the deal; Deutsche Bank and Jefferies will serve as co-managers.
Freddie holds the senior loss risk, a portion of the risk in the M-1, M-2 and M-3 classes, and the first loss in the junior Class B tranche.
STACR Series 2015-DNA2 comes two months after Freddie Mac's initial offering with exposure to actual losses on mortgages this year. The latest offering is the company's 13th STACR initiative since 2013.
Moody's Investors Service and Kroll Bond Ratings Agency are expected to rate the deal; it is expected to settle on June 29.