freddie mac single-family crt enters 2020...source: “housing finance at a glance: a monthly...
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Freddie Mac Single-FamilyCRT Enters 2020Tuesday, January 28, 2020, 1:30 ET
Today’s Speakers
Mike Reynolds, Presenter
Vice President
Credit Risk Transfer
Single-Family Portfolio Management2
Sonya Sheth, Host
Manager
Credit Risk Transfer
Single-Family Fixed Income Marketing
Freddie Mac | 2020
Poll Question
What is your biggest concern in 2020 with respect to your participation in CRT?
A. Economic downturn
B. Interest rates
C. Performance
D. Liquidity
E. Spreads
F. Other
Agenda▪ Housing Market Overview
▪ Development of an Asset Class
▪ Program Trends and Performance
▪ CRT 2020
▪ Resources
▪ Q&A and Wrap Up
Housing Market Overview
Freddie Mac Single-Family CRT Enters 2020
Freddie Mac | 2020
Housing Market Size
Housing Market Overview
6
0.60.8 0.8 0.9 1.0 1.1 1.2 1.3
1.5 1.1
0.5
0.9
1.0 0.7 0.5
0.8
2.1
1.9
1.3
1.8
2.1
1.81.7
2.1
2012 2013 2014 2015 2016 2017 2018 2019
Annual Single-Family Mortgage Originations ($ Trillions)
Source: Freddie Mac December 2019 Economic and Housing Research Outlook. Includes only 1st lien loans.
Refi
Purchase
Freddie Mac | 2020
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Serious Delinquency Rates Single-Family Loans
Fannie Freddie FHA VA
HPA and Delinquency Trends
Housing Market Overview
7
3.39%
1.87%
0.67%
0.61%110
120
130
140
150
160
170
180
190
200
2005 2007 2009 2011 2013 2015 2017 2019
National Home Prices
Cumulative increase of 17.5% since June 2006 (NSA Series)
2019 Q3 Not
Seasonally Adjusted
(NSA) Index Growth:
(0.06%)
2019 Q3 Seasonally
Adjusted (SA)
Index Growth: (0.87%)
Freddie
Mac House
Price Index
(December
2000=100)
Source: Freddie Mac. Based on Freddie Mac’s single-family credit guarantee portfolio.
Note: Quarterly growth rates are calculated as a 3-month change based on the final month of each quarter. Historical
growth rates change as new data becomes available. Values for the most recent periods typically see the largest changes.
Cumulative increase, based on the NSA series, calculated as the percent change from June 2006 to September 2019.
Source: “Housing Finance At a Glance: A Monthly Chartbook,” Housing Finance Policy Center, December 2019; Fannie Mae,
Freddie Mac, MBA Delinquency Survey and Urban Institute.
Note: Serious delinquency is defined as 90 days or more past due or in the foreclosure process. Not seasonally adjusted.
Freddie Mac | 2020
Serious Delinquency Rates During Recessions
Housing Market Overview
Sources: MBA National Delinquency Survey and Freddie Mac Purchase Only House Price Index SA (WRSI) from 1976Q1.
Note: The serious delinquent rate is defined as the rate of mortgage loans that are past due 90 Days and above or in foreclosure, as a percentage of the number of loans serviced during the quarter. The survey sample includes
about 85% of the U.S market for first-lien 1-4-unit mortgages.
-15
-10
-5
0
5
10
15
20
0
1
2
3
4
5
6
1972Q4 1975Q4 1978Q4 1981Q4 1984Q4 1987Q4 1990Q4 1993Q4 1996Q4 1999Q4 2002Q4 2005Q4 2008Q4 2011Q4 2014Q4 2017Q4
HP
A %
SD
Q %
Nov 73–Mar 75 Jan–Jul 80 Jul 90–Mar 91 Mar 01–Nov 01 Dec 07–Ju 09
1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017
Jul 81–Nov 82
Freddie Mac | 2020
Homeownership Demographics
Housing Market Overview
9
4.0
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
5.0
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
Age Cohort
Largest Age Cohorts in the U.S.
Peo
ple
in
2018 (
Millio
ns)
Median Age of First
Time Home Buyer
Gen Z Millennial Gen X
Source: U.S. Census Bureau.
77%
67%
43%
23%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Baby Boomer
Gen X
Millennial
Gen Z
Homeownership Rates by Generation
Source: U.S. Census Bureau, 2019 Current Population Survey Annual Social and Economic Supplement (CPS ASEC).
Total U.S.
Homeownership
Rate is 66%
Freddie Mac | 2020
Forecast
Housing Market Overview
Sales
▪ Low interest rates, modest inflation and a solid labor market have primed the U.S. housing for modest growth in 2020
▪ We expect home sales to increase from 6 million in 2019 to approximately 6.2 million in 2020
Rates
▪ We expect the 30-year mortgage rate to remain low, averaging 3.5% to 3.75% throughout 2020
▪ Surge in 2019 refinance activity ($846 billion) should slow to about $650 billion if mortgage rates hold steady in 2020
Prices
▪ Increase in home sales and house prices should boost purchase originations from $1.26 trillion in 2019 to $1.33 in 2020
▪ We expect house price growth to continue to decelerate in 2020 to an annual rate of 2.8%, down from 3.2% in 2019
10
Opinions, estimates, forecasts, and other views contained in this document are those of Freddie Mac's Economic & Housing Research group, do not necessarily represent the views of Freddie Mac or its management, and should
not be construed as indicating Freddie Mac's business prospects or expected results. Although the Economic & Housing Research group attempts to provide reliable, useful information, it does not guarantee that the information
or other content in this document is accurate, current or suitable for any particular purpose. All content is subject to change without notice. All content is provided on an “as is” basis, with no warranties of any kind whatsoever.
Information from this document may be used with proper attribution. Alteration of this document or its content is strictly prohibited.
Development of an Asset Class
Freddie Mac Single-Family CRT Enters 2020
Freddie Mac | 2020
Timeline
Development of an Asset Class
12
2012
Developed Concept• Freddie Mac Single-Family
CRT team established
Established Market• Issued first STACR and
ACIS transactions (60-80%
LTV fixed-rate collateral)
2013
2014
2015
Created Scale and Depth• Began transferring actual
loss in lieu of fixed severity
2016
Expanded Opportunity• Issued first ACIS 15-year
standalone transaction
Generated Momentum • Introduced HQ series
(>80% LTV)
Strengthened Structure• Issued first STACR Trust
transaction
• Issued Class B-2 notes
and extended STACR
term to 30 years
• Launched IMAGIN,
(Integrated Mortgage
Insurance)
Leveraged Success• Issued first FTR
transaction
(seasoned B-2 notes)
• Released Clarity data
intelligence portal
• Issued first STACR
REMIC transaction
2018
Broadened Focus• Issued first STACR
HARP transaction
2017 2019
2020
Driving to Exit
Conservatorship
Freddie Mac | 2020
CRT by the Numbers
Development of an Asset Class
Source: Freddie Mac, as of 12/31/2019. Includes all Single-Family CRT programs and UPB at issuance.
Note: Average trading per month in secondary market for 2019. Portion of single-family portfolio with credit risk protection as of earnings reported 9/30/2019.
7Years Since First Transaction
120+Transactions Issued Across
Single-Family CRT Offerings
245+Unique Investors in
Single-Family CRT Offerings
$2 BillionAverage Trading per Month
in Secondary Market
$53 Billion Risk Transferred to Private Capital on
Single-Family Mortgages
$1.4 Trillion
Single-Family Mortgages
with Credit Risk Protection
49% Portion of Single-Family Portfolio
with Credit Risk Protection
90%+Credit Risk Transfer Rate on Eligible,
Newly-Acquired Single-Family Mortgages
RMBS Deal of the Year
2019
Freddie Mac | 2020
Key Offerings
Development of an Asset Class
14
Series
DNA
On-the-run, original LTV of 61-80%
HQA
On-the-run, original LTV of 81-97%SAP
15-year loans
ARMR and FTR
Off-the-run loans
Series
DNA
On-the-run, original LTV of 61-80%
HQA
On-the-run, original LTV of 81-97%HRP and FTR
Off-the-run loans
SECURITIES (RE)INSURANCE CONTRACTS
Program Trends and Performance
Freddie Mac Single-Family CRT Enters 2020
Freddie Mac | 2020
Clarity
Program Trends and Performance
16
Freddie Mac’s data intelligence portal for the CRT community.
Clarity’s preset configurations offer quick, clear
views into Freddie Mac CRT data and make it
easy for any user to get valuable insights
quickly. Easily export and download charts to
your desktop – it’s that simple.
Advanced Filters for Quick
Performance Analysis
Clarity’s data visualizations enhance
understanding with crisp, clear information
design that makes it easy to spot trends and
zero in on key figures.
Data Visualizations Bring
Raw Numbers to Life
• Transaction proxy loss analysis.
• Download STACR and ACIS monthly
transaction data.
• Analysis for Automated Collateral
Evaluation® (ACE).
New Clarity Features
Now Available
Clarity.FreddieMac.com
Freddie Mac | 2020
Collateral Profile
Program Trends and Performance
Low-LTV FICO < 680 (%) Original LTV DTI > 45 (%) Collateral WAC (%) Investment Property (%) Home Possible (%) ACE (%)
2019-DNA1 8.9% 75.9 18.4 4.73 11.0 2.79 3.97
2019-DNA2 8.6% 76.1 18.8 4.85 9.2 4.22 5.80
2019-DNA3 7.7% 76.0 18.6 4.91 9.7 2.63 5.13
2019-DNA4 7.3% 76.0 17.2 4.91 10.7 2.26 6.14
2020-DNA1 6.5% 76.1 15.7 4.54 8.6 2.43 11.11
Average 7.7% 76.0 17.6 4.77 9.8 2.82 6.65
Source: Freddie Mac Clarity. Note: Amounts shown are as of issuance.
High-LTV FICO < 680 (%) Original LTV DTI > 45 (%) Collateral WAC (%) Investment Property (%) Home Possible (%) ACE (%)
2019-HQA1 5.5 92.7 15.5 4.66 0.4 26.17 0.00
2019-HQA2 5.7 92.6 16.2 4.79 0.4 30.44 0.00
2019-HQA3 5.5 92.5 16.0 4.88 0.5 24.26 0.00
2019-HQA4 5.8 92.3 15.6 4.93 0.5 22.99 0.00
2020-HQA1 4.6 92.4 12.9 4.49 0.3 23.08 0.00
Average 5.4 92.5 15.1 4.72 0.4 25.43 0.00
Freddie Mac | 2020
Serious Delinquencies
Program Trends and Performance
18
The performance of 2009 and 2010 vintages are dramatically better than pre-crisis vintages despite falling house
prices in their early years.
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96
Pre-Crisis Cumulative D90 by Vintage
1999 2000 2001 2002 2003
2004 2005 2006 2007 2008
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96
Post-Crisis Cumulative D90 by Vintage
2002 2009 2010 2011 2012 2013
2014 2015 2016 2017 2018
Source: Derived from Freddie Mac’s Single-Family Loan Level Dataset (SF LLD), as of November 2019 refresh: Originations: 1999-September 30, 2018. Performance data: 1999-March 31, 2019.
Note: Loans with an LTV between 60% and 97%, Fixed Rate with term between 241-360.
Freddie Mac | 2020
CRT Performance
Program Trends and Performance
19
Source: Freddie Mac monthly remittance data, as of December 2019.
0.0
0.2
0.4
0.6
0.8
1.0
DNA HQA DNA HQA DNA HQA DNA HQA DNA HQA
2015 2016 2017 2018 2019
Average Cumulative Net Losses by Issuance Year (bps)
Freddie Mac | 2020
Rating Agency Upgrades
Program Trends and Performance
20
Over 160 STACR bonds have been upgraded from original to current rating since program inception, with zero downgrades.
Source: Bloomberg, ratings as of January 2020 for on-the-run DNA/HQA transactions since 2013. Note: Class M-2 bonds from transactions with three mezzanine classes are excluded from the above analysis.
Front-End
Mezzanine
Current
Above IG IG Non IG
Issuance
Above IG 48%
IG 28% 25%
Non IG
Back-End
Mezzanine
Current
Above IG IG Non IG
Issuance
Above IG
IG 2%
Non IG 23% 35% 40%
Freddie Mac | 2020
STACR Liquidity
Program Trends and Performance
21
0%
2%
4%
6%
8%
10%
12%
14%
16%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec
2019
% o
f Ou
tsta
nd
ing
UP
BN
om
inal
Am
ou
nt
($b
illio
ns)
Monthly Trading Volume Over Trailing 12 Months
Nominal ($billions) % of Outstanding UPB
Source: Bloomberg, as of December 2019. Note: Trading volumes reflect the sum of all buy and sell trades.
CRT 2020
Freddie Mac Single-Family CRT Enters 2020
Freddie Mac | 2020
STACR and ACIS Issuance Calendar
CRT 2020
20 On-the-Run Deals
▪ Ten STACR and ten ACIS on-
the-run transactions, including
both low (DNA) and high
(HQA) LTV offerings
Additional Off-the-Run Deals
▪ Pending market conditions,
STACR/ACIS transactions
covering seasoned collateral
as well as ACIS15-year and
forward deals
2020 = $12–$16 Billion
Freddie Mac retains sole discretion over whether or not the issuances come to market and the timing thereof, which may be impacted by market conditions. As such, the information contained
in this document does not guarantee the timing of any future Freddie Mac offerings or the type of such offerings, or the amount of such offerings. This document is related to on-the-run
transactions. Freddie Mac may, pending market conditions, bring additional off-the-run deals. This document may be amended, superseded or replaced. Please use this issuance calendar for
informational purposes only. This document is not an offer to sell any Freddie Mac securities.
Freddie Mac | 2019
▪ Continue to transfer a significant amount of credit risk to private markets in a commercially reasonable and safe and sound manner
▪ Undertake actions to meet single-family and multifamily credit risk transfer objectives established by FHFA
▪ Actively pursue legacy asset risk transfer activities, including sales of non-performing loans and re-performing loans
▪ Under FHFA direction, undertake a comprehensive review of the credit risk transfer program, including a cost-benefit analysis
▪ As the Federal Housing Finance Agency (FHFA) lays out their milestones for existing conservatorship, Freddie Mac will:
▪ Execute them in a safe and sound manner
▪ Continue to fulfill our mission and service our clients through focusing on our key strategic pillars: performance, platform and people
▪ Be a consistent issuer in the CRT space, printing economically sensible deals to support the strong demand for CRT
24
Driving to Exit Conservatorship
CRT 2020
FHFA 2020 Scorecard for GSEs Freddie Mac’s Key Focus For 2020
Freddie Mac | 2020
Other Key Focuses
CRT 2020
Issuing off-the-run transactions
▪ Freddie Mac CRT will look to issue a number of off-the run deals in 2020, pending market conditions, for both STACR and ACIS consisting of HARP collateral and seasoned B-2 notes (FTR) as well as ACIS 15-year (SAP) and forward (AFRM) deals
Reducing the pipeline
▪ Another big initiative is to reduce the “the pipeline,” or the amount of time between when Freddie Mac issues a MBS guarantee and a related CRT transaction
Transitioning away from LIBOR
▪ Freddie Mac is also working on migration plan to transition the STACR program away from being a LIBOR-based structure, which will be announced to the market in the first half of the year
25
Resources
Freddie Mac Single-Family CRT Enters 2020
Freddie Mac | 2020
Freddie Mac Key Contacts and Resources
Resources
27
Credit Risk Transfer
Fixed Income Marketing
Websites CRT.FreddieMac.com | Clarity.FreddieMac.com
Mike Reynolds Vice President
Michael_S_Reynolds@freddiemac.com
(571) 382-4852
Christian ValenciaDirector
Christian_Valencia@freddiemac.com
(571) 382-3727
Charlotte Gladwin Director
Charlotte_Gladwin@freddiemac.com
(571) 382-3732
Jeff ShueDirector
Jeffrey_Shue@freddiemac.com
(571) 382-3023
Sonya ShethFixed Income Marketing, Manager
Sonya_M_Sheth@freddiemac.com
(571) 382-4376
Freddie Mac | 2020
Engagement Opportunities
Resources
28
SFIG West 2020February 23-26 | 2020
Aria Conference CenterLas Vegas, NV
IMN CRT SymposiumApril 29 | 2020
Conrad New YorkNew York, NY
Single-Family Investor DayJune 11 | 2020
Freddie Mac HeadquartersMcLean, VA
Q&A
Freddie Mac Single-Family CRT Enters 2020
Disclaimers
Freddie Mac | 2020
Safe Harbor Statements
Disclaimers
Freddie Mac obligationsFreddie Mac’s securities are obligations of Freddie Mac only. The securities, including any
interest or return of discount on the securities, are not guaranteed by and are not debts or
obligations of the United States or any federal agency or instrumentality other than Freddie
Mac.
No offer or solicitation of securities This presentation includes information related to, or referenced in the offering documentation
for, certain Freddie Mac securities, including offering circulars and related supplements and
agreements. Freddie Mac securities may not be eligible for offer or sale in certain jurisdictions
or to certain persons. This information is provided for your general information only, is current
only as of its specified date and does not constitute an offer to sell or a solicitation of an offer to
buy securities. The information does not constitute a sufficient basis for making a decision with
respect to the purchase or sale of any security. All information regarding or relating to Freddie
Mac securities is qualified in its entirety by the relevant offering circular and any related
supplements. Investors should review the relevant offering circular and any related
supplements before making a decision with respect to the purchase or sale of any security. In
addition, before purchasing any security, please consult your legal and financial advisors for
information about and analysis of the security, its risks and its suitability as an investment in
your particular circumstances.
Forward-looking statements Freddie Mac's presentations may contain forward-looking statements, which may include
statements pertaining to the conservatorship, the company’s current expectations and
objectives for its Single-family Guarantee, Multifamily and Capital Markets segments, its efforts
to assist the housing market, liquidity and capital management, economic and market
conditions and trends, market share, the effect of legislative and regulatory developments and
new accounting guidance, credit quality of loans the company owns or guarantees, the costs
and benefits of the company’s credit risk transfer transactions, and results of operations and
financial condition on a GAAP, Segment Earnings, non-GAAP and fair value basis. 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,
including changes in market conditions, liquidity, mortgage spreads, credit outlook, actions by
the U.S. government (including FHFA, Treasury and Congress), and the impacts of legislation
or regulations and new or amended accounting guidance, could cause actual results to differ
materially from these expectations. These assumptions, judgments, estimates and factors are
discussed in the company’s Annual Report on Form 10-K for the year ended December 31,
2018, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, which are available
on the Investor Relations page of the company’s website 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 presentation.
31
Freddie Mac | 2020
Disclaimer
Disclaimers
Notice to all Investors:
This presentation (“Presentation”) is not an offer to sell any Freddie Mac securities. Offers for any given security are
made only through applicable offering circulars and any related supplements, which incorporate Freddie Mac's
Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 14, 2019, and
all documents that Freddie Mac files with the SEC pursuant to Section 13(a), 13(c) or 14 of the Exchange Act,
excluding any information "furnished" to the SEC on Form 8-K. Content in this Presentation is not reflective of
current markets/spreads and is not indicative of any future Freddie Mac offerings. Please use this Presentation for
informational purposes only.
Notice to United Kingdom Investors:
This Presentation is only being distributed to and is directed at: (a) investment professionals falling within Article 19
of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "FPO"); (b) high net worth
entities falling within Article 49 of the FPO; and (c) other persons in respect of whom exemptions under the FPO are
available. The investments to which this Presentation relates are available only to, and any agreement to acquire
such investments, will be made only with, such persons. Any other person should not act or rely on this
Presentation or any of its contents.
This Presentation is not intended to be an offer of transferable securities to the public in the United Kingdom or any
European Union jurisdiction, in accordance with the Prospectus Directive (2003/71/EC, as amended). In any event,
this Presentation is made available only in circumstances in which a prospectus requirement under such Directive
does not apply, including but not limited to the distribution of this Presentation to qualified investors only.
Notice to Canadian Investors:
This Presentation is confidential and may not be reproduced or transferred, in whole or in part, to any other party
that is not an employee, officer, director, or authorized agent of the recipient without the express written consent of
Freddie Mac. Each person accepting these materials agrees to return them promptly upon request.
The material provided herein is for informational purposes only and delivered solely as reference material with
respect to Freddie Mac. The Presentation does not constitute an offer to sell or a solicitation of an offer to buy any
securities of Freddie Mac. Any offering of securities of Freddie Mac will occur only in accordance with the terms
and conditions set forth in an offering circular (“Offering Circular”). Investors are strongly urged to carefully review
the Offering Circular (including the risk factors described therein) and to discuss any prospective investment in
Freddie Mac with their legal and tax advisers in order to make an independent determination of the suitability and
consequences of an investment.
No person has been authorized to give any information or to make any representation, warranty, statement or
assurance not contained in the Offering Circular and, if given or made, such other information or representation,
warranty, statement or assurance must not be relied upon.
Prospective investors should inform themselves and take appropriate advice as to any applicable legal
requirements and any applicable taxation and exchange control regulations in the countries of their citizenship,
residence or domicile which might be relevant to the subscription, purchase, holding, exchange, redemption or
disposal of any securities of Freddie Mac.
Targets shown in this Presentation are objectives and should not be construed as providing any assurance or
guarantee as to the results that may be realized in the future from investment in any asset or asset class described
in the Presentation. Please be advised that any targets shown in the Presentation are subject to change at any
time and are current as of the date of this Presentation only. In addition, the information contained herein includes
observations and/or assumptions and involves significant elements of subjective judgment and analysis. No
representations are made as to the accuracy of such observations and assumptions and there can be no
assurances that actual events will not differ materially from those assumed. In the event any of the assumptions
used in the Presentation do not prove to be true, results are likely to vary substantially from those discussed therein.
Notice to Spain Investors:
No action has been or will be taken by Freddie Mac that would permit a public offering of the STACR securities in
Spain. Neither the STACR securities nor the offering have been or will be registered or approved by the Spanish
Securities Market Commission (Comisión Nacional del Mercado de Valores) and, therefore, no prospectus has
been or will be registered or approved by the CNMV for the purposes of this offering.
A prospective investor in securities of Freddie Mac must conduct its own independent review and due diligence to
make its own assessment of the merits and risks of making an investment in, perform its own legal, accounting and
tax analysis and conclude that the investment in the securities of Freddie Mac (i) is fully consistent with the
investor’s financial requirements and financial condition, investment objectives and risk tolerance; (ii) complies and
is fully consistent with all investment policies, guidelines and restrictions applicable to the investor; and (iii) is a fit,
proper and suitable investment for the investor.
32
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