Freddie Mac expects to issue $12bn to $16bn credit risk transfers in 2020

The US Federal Home Loan Mortgage Corporation Freddie Mac’s single-family business transferred $9.1 billion of credit risk on $231 billion of single-family mortgages from US taxpayers to the private sector in 2019.

Freddie Mac’s single-family credit risk transfer (CRT) programmes move risk away from US taxpayers to global private capital via securities and re/insurance policies.

In 2020, the company anticipates issuing between $12 billion and $16 billion CRTs.

“2019 was an incredibly productive year for single-family CRT, as we brought 30 deals to market,” said Mike Reynolds, vice president, credit risk transfer. “2020 will be another ambitious year as we expect it to be our largest issuance calendar yet.”

Through its flagship offerings, Freddie Mac issued approximately $1.8 billion across seven Structured Agency Credit Risk (STACR) and Agency Credit Insurance Structure (ACIS) deals in the fourth quarter—five on-the-run deals (actual loss - DNA and HQA) and two seasoned deals (actual loss - FTR). STACR DNA4 was Freddie Mac’s first Real Estate Mortgage Investment Conduit (REMIC) transaction.

As a result of STACR and ACIS on-the-run transactions this quarter, Freddie Mac transferred between 80 percent and 92 percent of the credit risk on the underlying reference pools, helping to reduce capital required under the Conservatorship Capital Framework.

Since the first CRT transaction in 2013, Freddie Mac’s Single-Family CRT programme has cumulatively transferred $53 billion in credit risk on $1.4 trillion in mortgages.