Sep. 14: Transferring Agency risk, LIBOR/SOFR news, and a primer on VA cash out refi pricing
Call this edition a “capital markets issue” about pricing, the move away from LIBOR, and risk. Hopefully it gives readers a sense of what is going on with mortgage rates and playing some catchup over the last several months with the way Agencies (today the focus is on Freddie Mac) transfer risk. And if you’re hoping mortgage rates will go to 0%, here are some thoughts: “Mortgage Rates: Thinking the Unthinkable.”
FHA & VA pricing
I received this note. “Rob, we’ve recently had our high LTV VA cash-out loans (+90% LTV), go away briefly and then this week Capital Markets came out with new pricing that’s about 3 points worse than ‘normal’ pricing. I know they are doing it in response the notice from Ginnie on liquidity issues for these types of loans, etc. and how they are going to be changing things after October 1st. Do you have any ideas, or does the market for that matter, on what’s going to happen with pricing on these going forward. I’m pretty sure that the pricing they are providing has a huge hedge in it. I think they’d rather offer something rather than nothing.”
I asked Michael Ehrlich with Refinitiv (parent of Tradeweb) for his thoughts on GNMA APM 19-05. “High-LTV VA cash out refinance loans have been experiencing extremely high prepayment speeds as they are often streamlined within 7-9 months of first payment. These early payoffs have upset MBS investors who paid a premium to own the bond. From a time value of money perspective, this behavior is similar to a borrower paying points to buy down their mortgage rate only to refinance the loan before breaking even on the upfront cost. Investors have put a great deal of pressure on GNMA to find a solution that slows down prepay speeds related to ‘churning’.
“Given the importance of VA lending programs, Ginnie Mae had to find an approach that isolates VA churning without significantly reducing broader liquidity in the MBS market. Tough ask! GNMA hopes to accomplish this by forcing lenders to pool high-LTV VA cash out loans in single-issuer GNMII30C MBS (‘Customs’). This is a double negative in terms of pricing because GNMII30C MBS are not TBA eligible which means they trade behind the GNMII30M TBA MBS indication you see on the screen (large, multi-issuer GNMA pools).
“Furthermore, because these loans have been isolated in single-issuer pools, it is now much easier for investors to monitor churning behavior at the MBS issuer level. That results in an additional price discounts on the bond when the lender/issuer has a proven track record of churning (potentially 2 to 3 points behind the same coupon GNMII TBA). This new rule goes into effect with GNMA securities guaranteed on or after November 1st which is why lenders have added adjusters to rate sheets.
“Unfortunately for secondary marketing desks, it’s impossible to pinpoint a consistent rate sheet adjustment on these loans. This is a function of how non-TBA eligible MBS trade, essentially as stipulated forwards (via BWIC). That means the takeout price can fluctuate greatly in between, especially in between monthly delivery cycles or when prepay speeds have been rising or even just generally volatile. Also, the dealer could decide they don’t want to bid the product all together.
“This much uncertainly forces pipeline hedgers to take a defensive position when it comes to the pricing they show on rate sheets. While higher mortgage rates will help slow prepayment speeds and thus lessen the discount applied to GNMA Customs with high-LTV VA cash outs, we wouldn’t expect VA churning to slow proportionality given an IRRRL is still likely to make sense to a VA borrower after six payments have been made. The relative discount will persist until churning stops.” Thank you, Michael!
LIBOR/SOFR
Members of a Commodity Futures Trading Commission advisory committee have urged CME Group and LCH to resolve a three-month difference in the date for adopting Secured Overnight Financing Rate discounting. Some participants disagree on whether adoption should occur on CME’s July date or LCH’s October 2020 date.
As part of the Financial Accounting Standards Board’s (FASB) efforts to ease the potential burden and effects of the LIBOR transition, the board issued a proposed Accounting Standards Update (ASU) that provides temporary accounting guidance intended to help companies navigate the challenges of the forthcoming elimination of LIBOR as a reference rate for many financial instruments. FASB reiterated its commitment “to providing stakeholders with the guidance they need to ease the process of migrating away from LIBOR and other interbank offered rates to new reference rates.” The proposal provides guidance on how companies should address any operational challenges arising from the transition, and addresses how companies can simplify the transition process while reducing costs. FASB is requesting that stakeholders review the proposal and provide comments by October 7, 2019.
Transferring risk
Since the financial crisis, mortgage giants Fannie Mae and Freddie Mac have wound down their retained portfolios, reduced risk, and returned more than $300 billion to the government. Let’s see what Freddie’s been up to in the capital markets. As a reminder, K-Deals are part of the company’s business strategy to transfer a portion of the risk of losses away from taxpayers and to private investors who purchase the unguaranteed subordinate bonds. K Certificates typically feature a wide range of investor options with stable cash flows and structured credit enhancement.
Freddie announced it would go to market with a new “KG-deal” designed to meet the needs of investors seeking “green” bonds by exclusively securitizing workforce housing loans made through the company’s Green Advantage program, which requires borrowers to make energy and water efficiency improvements to their properties (borrowers must reduce energy or water consumption by a total of 30 percent with a minimum of 15 percent of those efficiencies found through energy improvements). Freddie Mac has purchased more than $44.7 billion in green loans since the inception of the program in 2016. The improvements initiated thus far to the more than 1,600 properties financed through the Green Advantage program are projected to save 4.7 billion gallons of water per year and nearly 1.8 billion kBtu per year in energy per year. Nearly 86% of the units financed are affordable to tenants with incomes equal to or less than area median income, with tenants benefitting through lower utility costs.
In a K-Deal, multifamily loans purchased by Freddie Mac from its Optigo lender network are sold to a third-party depositor, who then deposits the multifamily loans in a trust that issues securities backed by the multifamily loans and privately sells subordinate and mezzanine bonds to investors. The trust sells the senior, guaranteed bonds to Freddie Mac, who in turn securitizes the senior bonds and publicly offers structured pass-through certificates to investors via placement agents. Freddie Mac securitized $72.8 billion in loans in 2018, with $61.6 billion of that total spread across 63 K-Deals. To date, Freddie Mac has not realized any credit losses on K-Deal guaranteed classes and 99.98 percent of K-Deal loans are current as of 2018.
The pricing for the K-G01 deal is as follows. Class A-SB has principal of $27.14 million, a weighted average life of 6.80 years, a coupon of 2.738 percent, a yield of 2.400 percent, and a dollar price of $101.9995. Class A-7 has principal of $210.05 million, a weighted average life of 6.56 years, a coupon of 2.875 percent, a yield of 2.362 percent, and a dollar price of $102.9961. Class A-10 has principal of $198.14 million, a weighted average life of 9.63 years, a coupon of 2.939 percent, a yield of 2.578 percent, and a dollar price of $102.9985.
Freddie Mac recently priced a new $718 million offering of Structured Pass-Through K-Certificates (K-F67) backed by floating-rate multifamily mortgages with ten-year terms. The deal is expected to settle on or about September 24, 2019. The K-F67 Certificates will not be rated, and will include one senior principal and interest class, one interest-only class, and one class entitled to static prepayment premiums. The KF67 Trust will also issue certificates consisting of the Class B, C and R Certificates, which will be subordinate to the classes backing the K-F67 Certificates and will not be guaranteed by Freddie Mac. Class A, the only offered class, has principal of $718.533 million, a weighted average life of 9.57 years, a coupon of 1-month LIBOR + 52, and a $100.00 dollar price.
Freddie Mac also priced K-097, a $1.2 billion deal backed by underlying collateral consisting of fixed-rate multifamily mortgages with predominantly 10-year terms, expected to settle on or about September 24, 2019. There are five offered classes. Class A-1 has principal of $114.372 million, a weighted average life of 7.01 years, a 2.16 percent coupon, a 2.07 percent yield, and a $100.4976 dollar price. Class A-2 has principal of $1,083.053 million, a weighted average life of 9.80 years, a 2.51 percent coupon, a 2.16 percent yield, and a $102.9958 dollar price. Class A-M has principal of $66.115 million, a weighted average life of 9.84 years, a 2.22 percent coupon, a 2.21 percent yield, and a $99.9932 dollar price. Class X1 has principal of $1,197.425 million, a weighted average life of 9.30 years, a 1.09 percent coupon, a 2.293 percent yield, and a $9.1774 dollar price. Finally, Class X3 has principal of $205.693 million, a weighted average life of 9.68 years, a 2.02 percent coupon, a 4.34 percent yield, and a $16.1836 dollar price.
Freddie Mac recently priced a $1.2 billion offering of new K-Certificates (K-736), which are backed by underlying collateral consisting of fixed-rate multifamily mortgages with predominantly 7-year terms. The deal should settle on or about September 17, 2019. K-Deals are part of the company’s business strategy to transfer a portion of the risk of losses away from taxpayers and to private investors who purchase the unguaranteed subordinate bonds, and typically feature a wide range of investor options with stable cash flows and structured credit enhancement. K-736 pricing is as follows. Class A-1 has principal of $110.482 million, a weighted average life of 3.56 years, a coupon of 1.895 percent, a yield of 1.719 percent, and a $100.500 dollar price. Class A-2 has principal of $1,093.460 million, a weighted average life of 6.64 years, a coupon of 2.282 percent, a yield of 1.785 percent, and a dollar price of $102.998. Class A-M has principal of $68.427 million, a weighted average life of 6.86 years, a coupon of 1.849 percent, a yield of 1.838 percent, and a dollar price of $99.995. Class X1 has principal of $1,203.942 million, a weighted average life of 6.06 years, a coupon of 1.312 percent, a yield of 2.347 percent, and a dollar price of $7.536. And Class X3 has principal of $207.130 million, a weighted average life of 6.62 years, a coupon of 2.013 percent, a yield of 3.419 percent, and a dollar price of $12.055.
Freddie Mac has been busy recently announcing a series of K-Deals, which are part of the company’s business strategy to transfer a portion of the risk of losses away from taxpayers and to private investors who purchase the unguaranteed subordinate bonds. K Certificates typically feature a wide range of investor options with stable cash flows and structured credit enhancement. K-F65, a $748 million deal comprised of multifamily mortgages with 10-year terms, settled on August 15. There was only one offered class, Class A, which had principal of $748.733 million, a weighted average life of 9.55 years, a coupon of 1-month LIBOR + 52, and an even $100.00 dollar price.
Freddie’s K-Deal featuring multifamily mortgages with 10-year terms the next week (K-096), which settled on August 22, was a $1.1 billion offering with five offered classes for investors. Class A-1 had principal of $106.048 million, a weighted average life of 6.89 years, a coupon of 2.143 percent, a yield of 2.05132 percent, and a dollar price of $100.4994. Class A-2 had principal of $1,019.000 million, a weighted average life of 9.83 years, a coupon of 2.519 percent, a yield of 2.17089 percent, and a dollar price of 102.9990. Class A-M had principal of $58.489 million, a weighted average life of 9.93 years, a coupon of 2.219 percent, a yield of 2.21351 percent, and a dollar price of $99.9913. Class X1 had principal of $1,125.048 million, a weighted average life of 9.29 years, a coupon of 1.25697 percent, a yield of 2.82854 percent, and a dollar price of $9.499. Finally, Class X3 had principal of $192.669 million, a weighted average life of 9.68 years, a coupon of 2.11101 percent, a yield of 4.33499 percent, and a dollar price of $16.2504.
Freddie’s $768 million K-Deal (K-F66) backed by multifamily mortgages with 10-year terms that is scheduled to settle on or about August 30, contained only one offered class. Class A has a principal of $768.258 million, a weighted average life of 9.61 years, a coupon of 1-month LIBOR + 52, and an even $100.00 dollar price. Class X1 and XP, each $853.621 million, are not offered.
Additionally, Freddie announced a $394 million K-Deal earlier this month backed by multifamily mortgages on senior housing properties (K-S11). This marks the eleventh senior family offering, and is comprised of two loans, each with fixed and floating rate components. Class AFL had principal of $158.893 million, a weighted average life of 9.29 years, a coupon of 1-month LIBOR + 62, and an even dollar price of 100.00. Class AFX-1 had principal of $20.849 million, a weighted average life of 7.01 years, a coupon of 2.154 percent, and a dollar price of $99.9988. Class AFX-2 had principal of $214.554 million, a weighted average life of 9.40 years, a coupon of 2.654 percent, and a dollar price of 102.9938. Class XFX had principal of $235.404 million, a weighted average life of 9.19 years, a coupon of 1.7589 percent, and a dollar price of 12.5024. The transaction settled August 16.
Freddie priced its eighth SB transaction in 2019 (SB65), which was a multifamily mortgage backed securitization backed by small balance loans underwritten by Freddie and issued by a third-party trust. Individual SBLs generally range from $1 million to $6 million and are backed by properties with five or more units. The $555 million transaction, which settled August 23, had five offered classes. Class A-5F had principal of $62.005 million, a weighted average life of 3.91 years, a coupon of 1.99 percent, a yield of 1.83407 percent, and a dollar price of $100.48. Class A-5H had principal of $191.866 million, a weighted average life of 4.06 years, a coupon of 2.13 percent, a yield of 1.97978 percent, and a dollar price of $100.47. Class A-7H had principal of $70.847 million, a weighted average life of 5.45 years, a coupon of 2.16 percent, a yield of 2.04811 percent, and a dollar price of $100.47. Class A-10F had principal of $102.072 million, a weighted average life of 7.30 years, a coupon of 2.16 percent, a yield of 2.07742 percent, and a dollar price of $100.47. Class A-10H had principal of $128.706 million, a weighted average life of 7.24 years, a coupon of 2.30 percent, a yield of 2.21652 percent, and a dollar price of $100.46. Class X1 will not be offered.
Freddie Mac priced a new K Certificate offering last week, $693 million in K-F64 certificates backed by floating-rate multifamily mortgages with ten-year terms, expected to settle on or about July 31, 2019. The K-F64 Certificates will not be rated, and will include one senior principal and interest class, one interest-only class, and one class entitled to static prepayment premiums. Class A, which was the only offered class, has a principal of $693.77 million, a weighted average life of 6.70 years, a discount margin of 44 bps, and an even 100.00 dollar price.
Freddie Mac also announced its first execution using the new structure with San Francisco-based IMPACT Community Capital, an impact investment manager investing in underserved communities. IMPACT swapped 77 loans for $141 million in Freddie Mac guaranteed Multi PCs. All the properties involved in the transaction received financing through 9% Low-Income Housing Tax Credits, and approximately 3,400 of the units financed are affordable to low-income residents, earning 50 percent or less of area median income. IMPACT can sell the Multi PCs to investors to acquire additional liquidity for future affordable housing investments, providing more efficient access to capital for the affordable housing space. This transaction ensures that IMPACT has the funding it needs to make more mission-driven investments, encouraging investment in underserved markets. The transaction continues a long history of innovation between IMPACT and Freddie Mac that included partnering on the first two Q-Series transactions in 2014 and 2015. Freddie Mac Multifamily is the nation’s multifamily housing finance leader.
A while back Freddie also announced a newly created Private Placement PC Swap execution (PPP) to help financial institutions with less than $10 billion in assets access additional liquidity for the financing of affordable housing to swap a pool of loans backed by affordable properties for Freddie Mac Multifamily PCs backed by the loans. The Multi PCs, which are guaranteed by Freddie Mac, can then be sold to investors, returning liquidity to the financial institution. The new structure is a variant of Freddie Mac’s 55-Day Multifamily PC Swap and will allow small financial institutions to access additional liquidity. Many affordable housing lenders generally lack the scale to access capital markets in a cost-effective manner, but by swapping Freddie Mac PCs through a low-cost execution, Freddie provides more liquidity for affordable housing.
On May 7, Freddie commenced its offer to exchange certain eligible Freddie Mac securities for To-Be-Announced (TBA)-eligible Uniform Mortgage Backed Securities Mirror Certificates (UMBS) as part of the Single Security Initiative. Opening the exchange offer represents the final step before the Single Security Initiative goes live on June 3 (freddiemac.com/MBS/legal/). The Single Security Initiative is expected to create a single, $5 trillion agency TBA mortgage-backed securities market, the second largest bond market in the world, with the goal of providing greater liquidity in the U.S. housing market and reducing costs for borrowers. Freddie Mac Gold PC investors who want the benefit of the new single security, or UMBS, should find the exchange frictionless.
The goal is a larger, more fungible secondary mortgage market, with greater liquidity for investors, better returns to U.S. taxpayers, and lower costs for homebuyers. Specifically, Freddie Mac is offering to exchange its 45-day payment delay TBA-eligible and non-TBA-eligible Gold Mortgage Participation Certificates (Gold PCs) securities for Freddie Mac 55-day payment delay, TBA-eligible UMBS Mirror Certificates (UMBS) and non-TBA-eligible Mortgage-Backed Securities Mirror Certificates (MBS), respectively. Freddie Mac is also offering to exchange its 45-day payment delay TBA-eligible and non-TBA-eligible Giant PCs for Freddie Mac 55-day payment delay, TBA-eligible Supers Mirror Certificates and non-TBA-eligible Giant Mortgage-Backed Securities Mirror Certificates, respectively.
Holders who participate in the exchange offer also will receive “float compensation,” a one-time payment, which is primarily intended to compensate holders for the difference in payment delay between eligible Gold PCs and Giant PCs (which have a 45-day payment delay) and the related Mirror Certificates (which have a 55-day payment delay). Investors should read the Exchange Offer Circular for the terms and conditions pertaining to Freddie Mac’s exchange offer. Freddie Mac offers investors two alternative exchange paths to complete exchanges: through dealers using Freddie Mac’s Dealer Direct portal, or directly with Freddie Mac as facilitated through Tradeweb. An overview of both paths and considerations for investors is available on Freddie Mac’s website.
Investors began booking exchange transactions through the two exchange paths on May 7 for settlement dates beginning on May 17. Freddie Mac is now planning for a transition period to help all market participants understand and prepare for exchanges, during which exchanges will settle T+2, and overall capacity will be limited to 10,000 exchanges per business day. Investors who prefer to hold their Freddie Mac Gold PC or Giant PC securities are not required to make an exchange. Freddie Mac expects to cease issuing Gold PCs after May 31, 2019. Certificates disclosed through the Cumulative 45-Day to 55-Day Exchange Activity File can be found on the Exchange Data Files webpage. Freddie Mac is also now publishing the Daily 45-Day to 55-Day Exchange Activity and the Aggregate Level 1 Collateral Exchange Activity data files on the Exchange Data Files webpage.
On May 21, Freddie Mac priced a new $801 million offering of Structured Pass-Through K-Certificates (K-F62 Certificates), backed by floating-rate multifamily mortgages with ten-year terms, expected to settle on or about May 31, 2019. The K-F62 Certificates will not be rated, and will include one senior principal and interest class, one interest-only class, and one class entitled to static prepayment premiums. The KF62 Trust will also issue certificates consisting of the Class B, C and R Certificates, which will be subordinate to the classes backing the K-F62 Certificates and will not be guaranteed by Freddie Mac. Pricing for Class A is as follows. $801.509 million in principal, a weighted average life of 6.62 years, a coupon of 1-month LIBOR + 48, and an even dollar price of 100.00. The K-F62 preliminary offering circular supplement can be found at http://www.freddiemac.com/mbs/data/kf62oc.pdf.
On May 16, Freddie Mac announced the pricing of the $561 million SB62 offering, a multifamily mortgage-backed securitization backed by small balance loans underwritten by Freddie Mac and issued by a third-party trust, anticipated to settle on or about May 24, 2019. Freddie Mac Small Balance Loans generally range from $1 million to $6 million and are generally backed by properties with five or more units. This is the fifth SB Certificate transaction in 2019.Freddie Mac is guaranteeing five senior principal and interest classes and one interest only class of securities issued by the FRESB 2019-SB62 Mortgage Trust. Freddie Mac is also acting as mortgage loan seller and master servicer to the trust. In addition to the six classes of securities guaranteed by Freddie Mac, the trust will issue certificates consisting of Class B and Class R Certificates, which will not be guaranteed by Freddie Mac and will be sold to private investors. Pricing for the deal is as follows. Class A-5H has principal of $134.729 million, a weighted average life of 4.11 years, a coupon of 2.83 percent, a yield of 2.6711 percent, and a dollar price of 100.48. Class A-7F has principal of $46.789 million, a weighted average life of 5.46 years, a coupon of 2.85 percent, a yield of 2.7371 percent, and a dollar price of 100.45. Class A-7H has principal of $67.206 million, a weighted average life of 5.53 years, a coupon of 2.98 percent, a yield of 2.8592 percent, and a dollar price of 100.50. Class A-10F has principal of $180.040 million, a weighted average life of 7.22 years, a coupon of 3.07 percent, a yield of 2.9789 percent, and a dollar price of 100.49. Class A-10H has principal of $132.311 million, a weighted average life of 7.26 years, a coupon of 3.20 percent, a yield of 3.1103 percent, and a dollar price of 100.48.
On May 14, Freddie Mac announced it sold 1,789 non-performing residential first lien loans (NPLs) from its mortgage-related investments portfolio via auction, totaling approximately $307 million. The loans are currently serviced by NewRez LLC, doing business as Shellpoint Mortgage Servicing, and the transaction is expected to settle in July 2019. The sale is part of Freddie Mac’s Standard Pool Offerings (SPO). Bids for the upcoming Extended Timeline Pool Offering (EXPO), which is a smaller sized pool of loans, are due from qualified bidders by May 21, 2019. Freddie Mac, through its advisors, began marketing the transaction on April 11, 2019. For the SPO offerings, the loans were offered as three separate pools of mortgage loans. The three pools consist of mortgage loans secured by geographically diverse properties.
Investors had the flexibility to bid on each pool individually and/or any combination of pools. Mortgages that were previously modified and subsequently became delinquent comprise approximately 57 percent of the aggregate pool balance. Additionally, purchasers are required to solicit distressed borrowers for additional assistance except in limited cases and ensure all pending loss mitigation actions are completed. The SPO pools and winning bidders are summarized below: pool #1 had unpaid principal of $93.5 million, 512 loans with an average delinquency of 20 months, and was won by InSolve Global Credit Fund. Pool #2 has unpaid principal of $127.8 million, 857 loans with an average delinquency of 28 months, and a winning bid by Elkhorn Depositor. Pool #3 has an unpaid principal of $86.1 million, 420 loans with an average delinquency of 28 months, and a winning bid by Elkhorn Depositor. To date, Freddie Mac has sold $8 billion of NPLs and securitized more than $50 billion of RPLs consisting of $29 billion via fully guaranteed PCs, $18 billion via Seasoned Credit Risk Transfer (SCRT) senior/sub securitizations, and $3 billion via Seasoned Loans Structured Transaction (SLST) offerings.
Freddie announced its Q2 2019 results for its Single-Family Credit Risk Transfer STACR and ACIS offerings, with three on-the-run transactions (DNA and HQA), and two seasoned transactions (FTR and HRP) issued. These transactions raised $1.4 billion in private investment, transferring credit risk away from U.S. taxpayers to the private sector. STACR and ACIS DNA series (60 percent-80 percent LTV) deals reduced conservatorship capital required for credit risk by 90 percent, while STACR and ACIS HQA series (80 percent-97 percent LTV) deals reduced conservatorship capital required for credit risk by 80 percent. Year to date, Freddie Mac’s single-family CRT programs, as a whole, have raised $5 billion in private investment providing protection on $135 billion in single-family mortgages. Since the first CRT transaction in 2013, Freddie Mac has transferred credit risk on more than $1.3 trillion in mortgages and raised $49 billion in private investment.
The second Freddie announcement was the pricing of the $398 million SB64 offering, a multifamily mortgage-backed securitization backed by small balance loans underwritten by Freddie Mac and issued by a third-party trust anticipated to settle on or about July 19, 2019. Freddie Mac Small Balance Loans generally range from $1 million to $6 million and are backed by properties with five or more units. In the seventh SB Certificate transaction in 2019, Freddie Mac is guaranteeing two senior principal and interest classes and one interest only class of securities issued by the FRESB 2019-SB64 Mortgage Trust. Freddie Mac is also acting as mortgage loan seller and master servicer to the trust. The $225.060 million class A-5H priced at a $100.48 dollar price includes a weighted average life of 4.05 years, a spread of 54 bps, a coupon of 2.52 percent, and a yield of 2.36338 percent. Class A-10F, which has a principal amount of $173.301 million and a dollar price of $100.46, has a weighted average life of 7.30 years, a spread of 70 bps, a coupon of 2.71 percent, and a yield of 2.62541 percent.
The final announcement was the pricing of a new $1.1 billion offering of Structured Pass-Through K-Certificates (K-094), multifamily mortgage-backed securities which settled on July 18. Class A-1 has principal of $96.189 million, a weighted average life of 6.98 years, a coupon of 2.701, a yield of 2.37189, and a dollar price of 101.9974. Class A-2 has principal of $984.665 million, a weighted average life of 9.85 years, a coupon of 2.903, a yield of 2.55050, and a dollar price of $102.9942. Class A-M has principal of $63.189 million, a weighted average life of 9.94 years, a coupon of 2.618, a yield of 2.61303, and a dollar price of $99.9925.
Freddie Mac priced two new K-deals this past week. K-735 issued approximately $1.2 billion in certificates backed by underlying collateral consisting of fixed-rate multifamily mortgages with predominantly 7-year terms. Pricing for the deal, which is expected to settle on or about July 25, is as follows. Class A-1 has principal of $69.13 million, a weighted average life of 4.23 years, a coupon of 2.742 percent, a yield of 2.20875 percent, and a dollar price of 101.9993. Class A-2 has principal of $1.073733 billion, a weighted average life of 6.65 years, a coupon of 2.862 percent, a yield of 2.35551 percent, and a dollar price of 102.9940. Class A-M has principal of $70.55 million, a weighted average life of 6.83 years, a coupon of 2.455 percent, a yield of 2.44158 percent, and a dollar price of 99.9983.
K-1512, a $679 million transaction expected to settle on or about July 26, contains the following pricing. Class A-1 has principal of $60.78 million, a weighted average life of 7.95 years, a coupon of 2.770 percent, a yield of 2.4770 percent, and a dollar price of 101.9994. Class A-2 has principal of $330.05 million, a weighted average life of 11.60 years, a coupon of 2.9880 percent, a yield of 2.6828 percent, and a dollar price of 102.9902. And Class A-3 has principal of $288.388 million, a weighted average life of 14.63 years, a coupon of 3.059 percent, a yield of 2.8084 percent, and a dollar price of 102.9987.
Freddie Mac priced a new $1 billion offering of Structured Pass-Through K-Certificates (K-095), which are backed by underlying collateral consisting of fixed-rate multifamily mortgages with predominately 10-year terms, expected to settle on or about August 9, 2019. Class A-1 has principal of $98.879 million, a weighted average life of 6.67 years, a coupon of 2.631 percent, a yield of 2.2887 percent, and a $101.9958 dollar price. Class A-2 has principal of $933.354 million, a weighted average life of 9.77 years, a coupon of 2.785 percent, a yield of 2.4313, and a $102.9948 dollar price. Class A-M has principal of $56.994 million, a weighted average life of 9.88 years, a coupon of 2.481 percent, a yield of 2.4749 percent, and a $99.9991 dollar price. Class X1 has principal of $1,032.233 million, a weighted average life of 9.16 years, a coupon of 1.0825 percent, a yield of 2.9778 percent, and a $7.8991 dollar price. Class X3 has principal of $177.317 million, a weighted average life of 9.73 years, a coupon of 2.1711 percent, a yield of 4.4487 percent, and a $16.8181 dollar price.
On June 17, Freddie Mac priced a new $1.2 billion offering of Structured Pass-Through K-093 Certificates, comprised of multifamily mortgage-backed securities expected to settle on or about June 20, 2019. Class A-1 has principal of $88.75 million, a weighted average life of 6.50 years, a coupon of 2.758 percent, a yield of 2.404 percent, and a dollar price of 101.9992. Class A-2 has principal of $1,093.42 million, a weighted average life of 9.78 years, a coupon of 2.982 percent, a yield of 2.626 percent, and a dollar price of 102.9991. Class A-M has principal of $55.78 million, a weighted average life of 9.93 years, a coupon of 2.726 percent, a yield of 2.721 percent, and a dollar price of 99.9978. The K-093 Certificates are backed by corresponding classes issued by the FREMF 2019-K93 Mortgage Trust and guaranteed by Freddie Mac. The K-93 Trust will also issue certificates consisting of the Class X2-A, Class X2-B, Class B, Class C, Class D and Class R Certificates, which will not be guaranteed by Freddie Mac and will not back any class of K-093 Certificates. K-Deals are part of the company’s business strategy to transfer a portion of the risk of losses away from taxpayers and to private investors who purchase the unguaranteed subordinate bonds featuring a wide range of investor options with stable cash flows and structured credit enhancement.
Freddie Mac announced the settlement of the first Seasoned Loans Structured Transaction Trust (SLST) offering of 2019—a securitization of approximately $1.2 billion including both guaranteed senior and non-guaranteed subordinate securities backed by a pool of seasoned re-performing loans. The SLST program is part of Freddie Mac’s seasoned loan offerings to reduce less-liquid assets in its mortgage-related investments portfolio and shed credit and market risk via economically reasonable transactions. Series 2019-1 includes approximately $942 million in guaranteed senior certificates and approximately $276 million in non-guaranteed subordinate certificates, with the guaranteed senior certificates already priced on May 21 through a syndicated process. The right to purchase the subordinate certificates was awarded through a competitive auction in March to Hains Point LLC. The underlying collateral backing the certificates consists of 7,604 fixed- and step-rate modified seasoned re-performing and moderately delinquent loans, modified to assist borrowers who were at risk of foreclosure to help them keep their homes. To date, Freddie Mac has sold $8 billion of non-performing loans and securitized more than $53 billion of RPLs. Additional information about the company’s seasoned loan offerings can be found at: http://www.freddiemac.com/seasonedloanofferings/.
Part 5 of 5 of “Books Never Written.” (Yes, my mind spends a lot of time in 3rd grade. Warning: Rated PG for bawdy humor.)
Interesting Places Around The World by Ben There & Don That
Paris Monuments by I. Phil Taurer
Text Editing by E. Max and Vi
The Bearded Chinaman by Harry Chin
How to Exercise by Eileen and Ben Dover
100 Ways to Diet by I. M. Hungry
Getting Fired by Anita Job
Crossing a Man with a Duck by Willie Waddle
A Sailor’s Adventure by Ron A. Ground
Green Vegetables by Brock Ali
Never Shave Again by Harry Pitts
Long Walk Home by Miss. D. Bus
Sitting on the Beach by Sandy Baum
Visit www.robchrisman.com for more information on our industry partners, access archived commentaries, or to subscribe to the Daily Mortgage News and Commentary. If you’re interested, visit my periodic blog at the STRATMOR Group web site. The current blog is, “Mortgage Rates: Thinking the Unthinkable.” If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.
Rob
(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. Currently there are hundreds of mortgage professionals looking for operations, secondary and management roles. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2019 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)
