Freddie Mac to Begin Issuing SOFR-Based STACR Transactions in Q4 2020
Freddie Mac Single-Family CRT intends to issue STACR (Structured Agency Credit Risk) securities using the Secured Overnight Financing Rate (SOFR) beginning in the fourth quarter of 2020, pending market conditions.
The structural change is a result of the announcement by the Chief Executive of the United Kingdom Financial Conduct Authority (FCA) that the FCA will no longer persuade or compel member panel banks to make London Interbank Offered Rate (LIBOR) submissions after 2021. As a result, market participants should expect LIBOR to be discontinued as a benchmark interest rate, or at least be deemed no longer representative of market interest rates, after 2021.
Freddie Mac has worked closely with Fannie Mae under the Alternative Reference Rates Committee (ARRC), a group of public sector and private market participants convened by the Federal Reserve Board and the New York Fed, to help ensure a successful transition from U.S. dollar LIBOR to a more robust reference rate, its recommended alternative, SOFR. Freddie Mac is working under the guidance of the Federal Housing Finance Agency (FHFA) to successfully execute a sound GSE-aligned transition plan that ensures the readiness of the single-family CRT ecosystem from issuer to vendors to investors.