The transactions, which were marketed beginning May, are expected to be settled by July.
Freddie Mac said in a statement that the SLST securitization program is a key part of the organization’s seasoned loans offerings “designed to reduce less liquid assets in its mortgage-related investments portfolio and shed credit and market risk via economically reasonable transactions.”
It also explained that the transactions involve a two-step process, the first of which is the sale of the loans through a competitive bidding process, subject to a securitization term sheet. The next step involves the securitization of the loans by the buyer. Freddie Mac guarantees – and will purchase –the senior tranche of the securitization.
The transaction is backed by collateral comprised of fixed and step rate modified seasoned loans. Freddie Mac explained that the loans were modified “to assist borrowers who were at risk of foreclosure to help them keep their homes.”
This particular pool’s loan to value ratio stands at 101%, based on broker price opinions (BPO). Unpaid principal balance is worth almost $300 million.
Wells Fargo Securities, Credit Suisse Securities and CastleOak Securities served as advisors to the transaction.
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Freddie Mac said that it has completed its second seasoned loan structured transaction (SLST) through an auction of more than 1,200 re-performing and moderately delinquent loans which are serviced by Select Portfolio Servicing.