Freddie Mac Whole Loan Securities (WLSSM)
Freddie Mac Whole Loan Securities, an issuance of guaranteed senior and non-guaranteed subordinated certificates, is a risk transfer securitization backed by single family mortgages purchased by Freddie Mac.
Principal and interest payments on the underlying mortgage loans, whether received from borrowers or advanced by Freddie Mac as Master Servicer, provide the funds for payment of certain expenses of the WLS trust and for distributions of principal and interest to investors. Additionally, Freddie Mac, in its role as Guarantor, will guarantee 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 mortgage loans in the WLS trust. Such shortfalls, if any, may result from delinquencies beyond the period for which Freddie Mac is required to advance; modifications involving interest rate reductions, principal forbearance or both; or liquidations in which net proceeds are less than the indebtedness due to the trust.
Other Whole Loan Securities Features
Other features and characteristics of Whole Loan Securities include:
- Mortgage loans deposited into the securitization trust are eligible for delivery to Freddie Mac under the Guide; i.e., no expansion of Freddie Mac's credit or underwriting standards.
- The loans flow through Freddie Mac's core systems and are subject to the same eligibility edits and servicing oversight; the loans are serviced in accordance with the Guide, including any prospective revisions and Topic 8600 of the Guide, dedicated exclusively to mortgages in a WLS trust.
- 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 provides a discrete set of R&W to the Trust and is the Trust's R&W counterparty. Although R&W generally sunset consistent with the Guide, certain differences exist.
- In addition to its guarantee, Freddie Mac's interests are aligned with investors and Freddie Mac will initially retain a 5 percent vertical slice of each of the subordinate securities.
- Principal payments on the mortgage loans are generally allocated on a pro rata basis between the senior and subordinate certificates, provided certain performance and collateral tests are met. Within the subordinate certificates, principal payments are allocated sequentially.
Whole Loan Securities Illustration