The Federal Housing Finance Agency's warning that so called super-priority liens on houses do not come before Freddie Mac's bodes well for investors in the mortgage giant's latest risk-sharing transaction, according to Moody's Investors Service.

That's because, unlike previous deals transferring the risk of credit losses, Freddie's latest offering of Structured Agency Credit Risk notes exposes investors to actual losses on mortgages ensured by the government-sponsored enterprise. By comparison, investors in previous deals bear losses according to a fixed formula, regardless of the magnitude of actual losses.

In a statement issued last week, the FHFA confirmed that it does not consent to any extinguishment of liens held by either Freddie or sister agency Fannie Mae in connection with liens such as energy retrofit programs or homeownership association fees. The FHFA's stance applies so long as two government-sponsored enterprises are under conservatorship.

"FHFA's stance, if developing case law supports it, will result in lower losses owing to super-priority liens while the GSEs are under conservatorship," Moody's said in a report published Monday.

The statement has no direct benefit on GSE risk-transfer securitizations in which investors bear losses according to a fixed formula. The statement will also have no direct benefit on private-label RMBS because federal law it cites won't apply to those deals.

"Indirectly, however, the FHFA's statement, as well as servicing requirements Freddie Mac previously issued, are credit positive for the entire mortgage sector because they raise awareness about the risk of HOA super liens and encourage servicers to find ways to protect against them," Moody's said in the report.

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