Resources for EU Institutional Investors
The enhanced due diligence obligations under Article 5, took effect on January 1, 2019. The information in this section is intended to support our current and future institutional investors located in the European Union in complying with the due diligence obligations, by mapping Structured Agency Credit Risk (STACR®) securities' disclosed information to multiple sections of the Article 5 due diligence requirements.
European institutional investors should be aware that Freddie Mac makes no representation or warranty concerning the accuracy or completeness of the information set forth herein as it relates to the due diligence requirements under Article 5 or otherwise. An EU institutional investor must conduct its own independent review and make its own assessment of the completeness of the information set forth herein with respect to the due diligence obligations set forth in Article 5. EU institutional investors should consult legal, tax and accounting advisors for assistance in assessing the information set forth herein and concluding that the due diligence obligations under Article 5 have been satisfied.
The following tables outline potentially relevant published information for certain sections of Article 5.
Article 5.1 – Verifications
Article 5.1(b): Credit granting based on sound and well-defined criteria and clearly established processes, with effective systems to apply criteria and processes
- Freddie Mac determines and applies various requirements and limitations to the loans it purchases. Additionally, it sets guidelines for lenders from whom Freddie Mac will purchase loans and monitors compliance for such specifications. Information about most of our underwriting and servicing requirements can be accessed through Freddie Mac's Single-Family Forms and Guide
- Loan servicing and acquisition standards for any specific STACR transaction can be found in Appendix E of its Private Placement Memorandum within the Deal Documents listed for each STACR offering on the Single-Family CRT website.
- In each STACR, the reference obligations must meet eligibility criteria, including certain loan-to-value thresholds, and must have no underwriting or servicing defects. Prior to a STACR issuance, a Third-Party due diligence assessment is completed on a random sample of the loans in the related STACR pool. This information and the results of the assessments can be found in Appendix E of each transaction's Private Placement Memorandum. See Servicing Standards and Quality Control Process and Third-Party Due Diligence Review. Additionally, in order to ensure that the loans we purchase satisfy Freddie Mac's standards, we conduct internal periodic quality control reviews.
- An overview of Freddie Mac's STACR program and risk management framework can be found in our STACR 101 presentation which can be found on the Single Family CRT website under Resources in Offering Overview.
- To align the interests of Freddie Mac and its investors, Freddie Mac retains at least 5% of every STACR tranche. At each STACR closing, Freddie Mac executes a risk retention letter stating that it will hold on an ongoing basis at least 5% of every STACR tranche. Please see the Risk Retention Letter available for each STACR transaction in the Deal Documents section, Single-Family CRT STACR website.
- In every STACR transaction, Freddie Mac provides a loan-level file at the moment of issuance, as well as current monthly data. Users can access data files under Resources the STACR Page of the Single-Family CRT website. Additionally, Freddie Mac's CRT data intelligence portal, Clarity, provides visibility into STACR reference pool risk characteristics and ongoing performance.
- Documentation for every STACR transaction can be found under Deal Documents on the STACR Page of the Single-Family CRT website.
- To support investors filling out the reports required by Article 7, Freddie Mac provides a mapping file that links STACR's data fields with the fields in the template set out in Annex II to Commission Delegated Regulation (EU) 2020/1224 for reporting asset-level information for loans to private households secured by residential real estate. Download Freddie Mac – STACR to ESMA mapping file: Excel or PDF. For information of the nature specified in the template set out in Annex XII to Commission Delegated Regulation (EU) 2020/1224 for investor reporting, see the trustee reports from Citibank, Deutsche Bank and U.S. Bank.
Article 5.3 – Due Diligence Assessment
The risk factors associated with a STACR transaction are disclosed in the Risk Factors section of the Private Placement Memorandum for such STACR transaction, which is available under Deal Documents on the STACR Page of the Single-Family CRT website.
- Information exhibiting the sensitivity of yields and other variables to different pre-payment simulations, credit events, or write-down amounts are disclosed in the Prepayment and Yield Considerations section of the Private Placement Memorandum for a STACR transaction, which is available under Deal Documents on the STACR section of the Single-Family CRT website.
- The ongoing performance of STACR reference pools can be accessed via Freddie Mac's CRT data intelligence portal, Clarity. Risk characteristics and stratifications of the underlying reference pools are available in advance of each STACR issuance through transaction-specific presentations distributed to potential investors.
- The detailed structure of each STACR security, including deal characteristics such as payment priority, credit support and delinquency triggers, definition of loss, credit events and issuer support obligations is described in the applicable Private Placement Memorandum, section: Description of the Notes, which can be found under Deal Documents on the STACR Page of the Single-Family CRT website.
Article 5.4 – Monitoring and Stress Testing
- Freddie Mac makes available an extensive Single-Family Loan-Level Dataset. This provides information regarding the loans in Freddie Mac's portfolio and may help investors build more accurate credit performance model in support of ongoing risk sharing initiative.
- Freddie Mac also makes available the loan level data mentioned above on Freddie Mac's CRT data intelligence portal, Clarity, which offers ongoing loan performance information across deals. Freddie Mac does not perform stress tests on cash flows, and collateral values are not provided by Freddie Mac publicly. Nevertheless, loan and deal level data sets are available for third-party vendors. Cash flow, credit and pre-payment analytics are supported by: Bloomberg, BlackRock, and IntexCalc, among others.
- A number of brokers/dealers are able to assist investors with any analytical and modeling requirements. Many of such parties also release periodic research on the performance of STACR deals.
- Information exhibiting the sensitivity of yields and other variables to different pre-payment simulations, credit events, or write-down amounts are presented in the Prepayment and Yield Considerations section of the Private Placement Memorandum of each transaction and can be found under Deal Documents on the Single-Family CRT website.
Securitizations are eligible for the STS designation only if each of the originator, sponsor and securitization special purpose entity ("SSPE") were established in the European Union. Freddie Mac and each STACR SSPE are established in the United States.
*PLEASE NOTE: References to third-parties, including rating agencies and vendors, are provided for information only; Freddie Mac does not specifically endorse any third-parties or their products/services. Freddie Mac is not responsible for the content or accuracy of external third-party websites.