Freddie Mac announced an approximate $1.45 billion Seasoned Loans Structured Transaction (SLST) – of a pool of seasoned re-performing loans. This will be the fifth SLST since the launch of the program in 2016 and the largest SLST of 2018. It also marks the second time a Freddie Mac - created trust will be the issuer of the SLST securitization, Freddie Mac announced in a release.
The SLST program is a key 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.
The seasoned re-performing loan pool is primarily comprised of loans that were modified to assist borrowers who were at risk of foreclosure to help them keep their homes. The pool consists of re-performing and moderately delinquent loans, the release stated.
This transaction will involve a two-step process. The initial step involves the auction of the right to purchase the subordinate non-guaranteed certificates via a competitive bidding process subject to the terms set forth in a securitization term sheet. The winning bidder will be chosen on the basis of economics, subject to meeting Freddie Mac’s internal reserve levels. In the second step, a Freddie Mac-created trust will securitize the loans and issue both senior and subordinate certificates. Freddie Mac will guarantee, and may initially retain the guaranteed security issued from such securitization. The winner of the auction will purchase the subordinate certificates at closing.
Advisors to Freddie Mac on this transaction are of Citigroup Global Markets Inc., Wells Fargo Securities, LLC, and Samuel A. Ramirez & Company, Inc., a minority owned business.