Freddie Mac Single-Family CRT Expects to Ramp Up Volume in 2022

Rhea-AI Summary

Freddie Mac announced plans to issue at least $25 billion in Single-Family Credit Risk Transfer (CRT) in 2022, focusing on STACR and ACIS transactions. The issuance aims to meet the new capital requirements under the Enterprise Regulatory Capital Framework. New M-1A and M-1B slices will be introduced to attract investment-grade buyers. Additionally, Freddie Mac plans to offset issuances with $15 billion through financial maneuvers like paydowns and repurchases. In 2021, Freddie Mac issued over $18 billion across various transactions.

Positive

• Anticipated issuance volume of at least $25 billion in 2022, indicating robust market activity.
• Introduction of M-1A and M-1B slices expected to attract new investment-grade capital.
• Successful management of $15 billion through paydowns and other financial strategies.

Negative

• Increased capital requirements under the ERCF compared to the previous CCF may pose financial constraints.

Company Planning to Introduce M-1A and M-1B Slices to the Investment-Grade Tranche

MCLEAN, Va., Jan. 05, 2022 (GLOBE NEWSWIRE) -- Freddie Mac today announced that its Single-Family credit risk transfer (CRT) program expects issuance volume of at least $25 billion in 2022. The issuances are expected to include primarily STACR^® (Structured Agency Credit Risk) and ACIS^® (Agency Credit Insurance Structure) transactions.

“Freddie Mac is responding to the capital requirements established by the Enterprise Regulatory Capital Framework (ERCF) with plans to optimize our CRT offerings in 2022. We expect a record year for STACR and ACIS issuance,” said Freddie Mac’s Mike Reynolds, Vice President of Single-Family CRT.

The ERCF, which establishes risk-based and leverage capital requirements for Freddie Mac, requires Freddie Mac to hold significantly more capital than it did under the Conservatorship Capital Framework (CCF). For example, the pre-CRT capital requirement for the Freddie Mac STACR 2021-DNA7 reference pool is approximately 552 basis points under ERCF but would be approximately 312 basis points under CCF.

In addition to anticipated greater issuance volume, the company expects to introduce new slices of the M-1 tranche to its STACR on-the-run offerings in 2022.

“We anticipate a market for M-1A and M-1B, as well as the M-2 tranche among sophisticated buyers seeking investment-grade opportunities in agency risk,” said Reynolds. “That may be of special interest to investors who expect to take advantage of any STACR buybacks in 2022 and who are looking for a way to redeploy their capital. We believe the M-1A tranche could bring new capital into the program.”

Overall, the company expects to partly offset 2022 issuances by $15 billion through paydowns, repurchases and call options. The company conducted its first-ever tender offer for STACR notes in 2021, retiring $1.6 billion original principal balance of notes that had substantially deleveraged (due to decreases in credit risk of related reference pools and increases in credit enhancement to STACR securities), and that no longer provided Freddie Mac with an economically sensible means of transferring credit risk.

Through its flagship offerings, Freddie Mac issued more than $18 billion across 10 STACR and 11 ACIS transactions in 2021.

About Freddie Mac Single-Family Credit Risk Transfer
Freddie Mac’s Single-Family CRT programs transfer credit risk away from U.S. taxpayers to global private capital via securities and (re)insurance policies, providing stability, liquidity and affordability to the U.S. housing market. The GSE Single-Family CRT market was founded when Freddie Mac issued the first STACR^® (Structured Agency Credit Risk) notes in July 2013. In November 2013, ACIS^® (Agency Credit Insurance Structure^®) was introduced. Today, the industry-leading and award-winning programs attract institutional investors and (re)insurance companies worldwide. For specific STACR and ACIS transaction data, visit Clarity Data Intelligence^SM.

About Freddie Mac
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, investors and taxpayers. Learn more at FreddieMac.com, Twitter @FreddieMac, and Freddie Mac’s blog FreddieMac.com/blog.

This document contains forward-looking statements within the meaning of Section 27A of the Securities Act. These statements involve known and unknown risks and uncertainties, some of which are beyond our control. These statements are not historical facts but rather represent Freddie Mac’s expectations based on current information, plans, judgments, assumptions, estimates and projections. Actual results or performance may differ from those described in or implied by such forward-looking statements due to various risks, uncertainties and other factors including the following: general economic and business conditions, competition, changes in political, social and economic conditions, regulatory initiatives and compliance with governmental regulations, customer preference and various other matters. Forward-looking statements are made only as of January 5, 2022. We undertake no obligation to update any forward-looking statements we make to reflect events or circumstances occurring after January 5, 2022.

MEDIA CONTACT: Fred Solomon
703-903-3861
Frederick_Solomon@freddiemac.com

 

FAQ

What is Freddie Mac's planned issuance volume for 2022?

Freddie Mac plans to issue at least $25 billion in Single-Family Credit Risk Transfer (CRT) in 2022.

What new products is Freddie Mac introducing in 2022?

Freddie Mac is introducing new M-1A and M-1B slices to its STACR offerings.

How much did Freddie Mac issue in CRT transactions in 2021?

In 2021, Freddie Mac issued more than $18 billion across 10 STACR and 11 ACIS transactions.

How does the ERCF impact Freddie Mac's capital requirements?

The Enterprise Regulatory Capital Framework requires Freddie Mac to hold significantly more capital compared to the previous Conservatorship Capital Framework.

What strategies does Freddie Mac plan to use to offset issuances in 2022?

Freddie Mac plans to offset $15 billion of 2022 issuances through paydowns, repurchases, and call options.