WLS (Whole Loan Securities)
WLS is a credit risk transfer (CRT) security offering backed by single-family mortgages purchased by Freddie Mac. WLS comprises a fully-collateralized, non-synthetic issuance of guaranteed senior and non-guaranteed subordinated certificates. WLS offerings are no longer issued, but past offerings are still active.
Principal and interest payments on the underlying loans of each issued security, whether received from borrowers or advanced by Freddie Mac as Master Servicer pursuant to the terms of the operative agreements, provide the funds for distributions of principal and interest to investors and payment of certain expenses of the WLS trust. Additionally, Freddie Mac, in its role as Guarantor, guarantees timely interest and ultimate principal payments to the senior certificates. Investors in non-guaranteed, subordinate certificates may not receive full payments of either principal or interest on the certificates as a result of realized losses on the loans in the WLS Trust.
- Loans deposited into the securitization trust are eligible for delivery to Freddie Mac under the Guide.
- Representations and warranties (R&W) provided by Sellers to Freddie Mac, and the enforcement and sunsetting of those R&W, remain unchanged from the Guide.
- Freddie Mac as Seller provides a discrete set of representations and warranties to the Trust.
- Freddie Mac will initially retain a 5% vertical slice of each of the subordinate securities, demonstrating an alignment of interest with investors.
- Subject to certain deal-level triggers, principal payments on the mortgage loans are allocated on a pro rata basis between the senior and subordinate certificates and sequentially amongst the subordinate certificates.