Freddie Mac's Adjustable Rate Mortgage (ARM) PC program appeals to investors looking for assets to match short-term liabilities and liabilities with floating rates. Most mortgages backing Freddie Mac ARM PCs are characterized by conventional first liens, with original maturities of 30 years or less. A weighted average of the characteristics of the underlying mortgages are rolled up to the PC level. PC coupons for ARM PCs are updated monthly based on a weighted average of the interest rates on the underlying mortgages.
Freddie Mac offers ARM PCs backed by fully amortizing mortgages. Please see the PC Offering Circular for risk characteristics that affect ARM yields.
Freddie Mac guarantees the timely payment of interest and the ultimate payment of principal on all ARM PCs. ARM PCs feature a payment delay of 75 days from the time interest begins to accrue on the ARM PC until the time the investor receives a payment.
ARM PCs differ from U.S. Treasury securities. First, they can be prepaid at any time since the underlying mortgages can be paid off by homeowners prior to a loan’s maturity. Because of this call option investors have implicitly sold to homeowners, mortgage-backed securities generally provide a higher nominal yield than comparable duration U.S. Treasury securities. Second, ARM PCs are not backed by the full faith and credit of the United States. Freddie Mac guarantees the timely payment of interest and ultimate payment of principal on all ARM PCs.
Monthly interest on ARM PCs is based on the weighted average of the note rates of the underlying mortgages, less the guarantee and servicing fees. ARM PC weighted averages may change monthly, reflecting possible changes in the underlying mortgage coupons.
Hybrid ARMs have an initial “fixed-rate” period, typically between two and ten years, followed by an adjustable-rate period. View the investment attributes and pooling parameters for Freddie Mac ARM PCs.
Certain Freddie Mac ARM PCs can be pooled together in a single ARM Giant PC, enabling investors to manage their portfolios more efficiently. The flexibility of Freddie Mac’s ARM Giant PC program allows for a wide variety of assets to be used in Giant PC formation and maximizes the value and liquidity of Freddie Mac ARM PCs. All ARM Giant PCs bear interest at a pass-through coupon that adjusts monthly based on the weighted average of the note rates of the underlying mortgages in the ARM PCs. View the pooling requirements for ARM Giant PCs.
- Disclosure Guide (Pre 8/28/2017)
- Loan Disclosure Variable Descriptions (Pre 8/28/2017)
- Modified PC Disclosure Calculations (Pre 8/28/2017)
- PC Disclosure Calculations (Pre 8/28/2017)
- PC Prefix Guide (Pre 4/4/2018)
This product overview is not an offer to sell or solicitation of an offer to buy any Freddie Mac securities. Offers for any given security are made only through applicable offering circulars and related supplements, which incorporate Freddie Mac’s Information Statement and related supplements.