Freddie Mac Prices $232 Million in Multifamily Structured Credit Risk Notes

Rhea-AI Summary

Freddie Mac (FMCC) has priced approximately $232 million in new Multifamily Structured Credit Risk (MSCR) Notes, Series 2021-MN2. This initiative aims to mitigate mortgage credit risk while promoting affordable rental housing. The MSCR program transfers credit risk on multifamily mortgage loans to private investors. The reference pool for these notes includes 40 loans with an unpaid principal balance of around $4 billion, with 91% supporting low-income families. Notably, Freddie Mac retains significant risk in senior loss and first-loss classes.

Positive

• Freddie Mac priced $232 million in MSCR Notes, indicating strong market interest.
• 91% of the reference pool loans support low-income families, enhancing Freddie Mac's commitment to affordable housing.

Negative

• None.

MCLEAN, Va., July 23, 2021 (GLOBE NEWSWIRE) -- Freddie Mac (OTCQB: FMCC) recently priced a new offering of Multifamily Structured Credit Risk (MSCR) Notes, Series 2021-MN2. The MSCR (pronounced M-SCORE) program is designed to reduce Freddie Mac’s exposure to mortgage credit risk and bolster the company’s mission of supporting affordable and quality rental housing. MSCR transactions transfer to private investors a portion of the credit risk on two categories of eligible multifamily mortgage loans: loans that back certain fully guaranteed securities issued by Freddie Mac through its participation certificate securitization program (PC Loans); and loans that are originated in connection with Freddie Mac’s multifamily targeted affordable housing tax-exempt bond credit enhancement program (BCE Loans). The approximately $232 million in MSCR Notes were priced on July 21, 2021.

The MSCR Notes are unsecured and unguaranteed mezzanine classes issued by a trust. Freddie Mac holds in its entirety the senior loss risk A-H class and the first loss B-2H class in the capital structure, along with retaining a portion of the risk in the class M-1, M-2 and B-1 tranches.

MSCR Notes Series 2021-MN2 Pricing:

Class	Principal/Notional Amount ($mm)		Initial Credit Enhancement		Weighted Average Life (Years)	Benchmark	Spread (bps)	Price
M-1	58.184		6.00%		5.11	30-day SOFR Average	+180	$100.00
M-1H*	$3.062		6.00%		Non-offered Vertical Reference Tranche
M-2	$135.764		2.50%		8.88	30-day SOFR Average	+335	$100.00
M-2H*	$7.145		2.50%		Non-offered Vertical Reference Tranche
B-1	$38.789		1.50%		12.43	30-day SOFR Average	+550	$100.00
B-1H*	$2.042		1.50%		Non-offered Vertical Reference Tranche
B-2H*	$61.246		0%		Non-offered Reference Tranche

*Each reference tranche represents risk retained by Freddie Mac.

The amount of periodic principal and ultimate principal paid by the trust is determined by the performance of the MSCR 2021-MN2 reference pool, which consists of 35 BCE Loans and 5 PC Loans originated between 2014 and 2020 with an approximate unpaid principal balance of $4 billion. Over 91% of UPB in the reference pool have at least a portion of the units designated to low-income families, demonstrating Freddie Mac’s work to support affordable housing through credit risk transfer investment opportunities. The loans adhere to Freddie Mac's multifamily underwriting, internal fraud prevention and quality control standards.

Details:

Co-Lead Managers and Joint Bookrunners: Wells Fargo Securities, LLC and BofA Securities, Inc.

Co-Manager: Drexel Hamilton, LLC

This announcement is not an offer to sell any Freddie Mac securities. Offers for any given security are made only through applicable offering circulars and related supplements, which incorporate Freddie Mac’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission (SEC) on February 11, 2021; all other reports Freddie Mac filed with the SEC pursuant to Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) since December 31, 2020, excluding any information "furnished" to the SEC on Form 8-K; and all documents that Freddie Mac files with the SEC pursuant to Sections 13(a), 13(c) or 14 of the Exchange Act, excluding any information “furnished” to the SEC on Form 8-K.

Freddie Mac’s press releases sometimes contain forward-looking statements. Forward-looking statements involve known and unknown risks and uncertainties, some of which are beyond the company’s control. Management’s expectations for the company’s future necessarily involve a number of assumptions, judgments and estimates, and various factors could cause actual results to differ materially from the expectations expressed in these and other forward-looking statements. These assumptions, judgments, estimates and factors are discussed in the company’s Annual Report on Form 10-K for the year ended December 31, 2020, and its reports on Form 10-Q and Form 8-K, which are available on the Investor Relations page of the company’s Web site at www.FreddieMac.com/investors and the SEC’s website at www.sec.gov. The company undertakes no obligation to update forward-looking statements it makes to reflect events or circumstances occurring after the date of this press release. The multifamily investors section of the company’s Web site at https://mf.freddiemac.com/investors/ will also be updated, from time to time, with any information on material developments or other events that may be important to investors, and we encourage investors to access this website on a regular basis for such updated information.

The financial and other information contained in the documents that may be accessed on this page speaks only as of the date of those documents. The information could be out of date and no longer accurate. Freddie Mac undertakes no obligation, and disclaims any duty, to update any of the information in those documents.

Freddie Mac makes home possible for millions of families and individuals by providing mortgage capital to lenders. Since our creation by Congress in 1970, we've made housing more accessible and affordable for homebuyers and renters in communities nationwide. We are building a better housing finance system for homebuyers, renters, lenders, and taxpayers. Learn more at FreddieMac.com, Twitter @FreddieMac and Freddie Mac's blog FreddieMac.com/blog.

MEDIA CONTACT: Michael Morosi
(703) 918-5851
Michael_Morosi@FreddieMac.com
INVESTOR CONTACTS: Robert Koontz
571-382-4082
Luba Kim-Reynolds
212-418-8879

 

FAQ

What are Freddie Mac's MSCR Notes Series 2021-MN2?

Freddie Mac's MSCR Notes Series 2021-MN2 are structured credit risk notes priced at approximately $232 million aimed at transferring mortgage credit risk to private investors.

How much did Freddie Mac raise from the MSCR Notes offering?

Freddie Mac raised approximately $232 million from the offering of MSCR Notes Series 2021-MN2.

What is the significance of Freddie Mac retaining risk in the MSCR Notes?

Freddie Mac's retention of risk in senior loss and first-loss classes demonstrates its commitment to managing credit risk while supporting affordable housing.

What portion of the loans in the MSCR Notes supports low-income families?

Over 91% of the loans in the MSCR Notes reference pool are designated for low-income families, reinforcing Freddie Mac's mission of affordable housing.

Who are the lead managers for the MSCR Notes offering?

The lead managers for the MSCR Notes offering are Wells Fargo Securities, LLC, and BofA Securities, Inc.