Kroll Bond Ratings Agency plans to rate the M1 and M2 notes of Freddie Mac's latest $966 million risk-share securitization,
KBRA expects to rate the M1 notes A’ and the M2 notes BBB; the structure will also issue M3 notes that will not be rated by the ratings agency. Freddie Mac’s February deal, STACR 2014-DN1, also offered three tranches (M1, M2 and M3) with different levels of credit support. This is the second STACR transaction to be rated by KBRA.
The $28.1 billion reference pool of 116,677 mortgages has a weighted average (WA) FICO of 760, a WA loan-to-value (LTV) of 75%, and a WA combined loan-to-value (CLTV) of 76%. The class M1 and M2 notes offer credit enhancement of 2.00%; the class M3 notes offer credit enhancement of .30%.
The securities are unsecured obligations of Freddie Mac; yet their principal repayment is based on the prepayments and defaults on a reference pool of more than $20 billion of residential mortgages acquired by Freddie in the third quarter of 2012. They provide a form of credit enhancement to Freddie, assuming some, but not all, of the risk of the underlying loans.
Morgan Stanley and Nomura Securities are the co-lead managers on the transaction.