STACR Securitized Participation InterestsSM
This CRT structure allows for issuance of unguaranteed certificates backed by participation interests in recently originated mortgage loans acquired by Freddie Mac through its cash window. At issuance, the participation interests, representing a specified beneficial interest in the related mortgage loans, are deposited into a STACR SPISM trust, with a REMIC election made on the participation interests.
Prior to the issuance of STACR SPI unguaranteed certificates, participation interests representing the remaining beneficial interest in the underlying mortgage loans are deposited into one or more PC trusts which then issue Freddie Mac Gold PCs. Consistent with the existing practice in its PC administration activities, Freddie Mac will repurchase participation interests from the respective PC trusts, as permitted by the PC Master Trust Agreement (generally when the related mortgage loan becomes 120 days delinquent). Participation interests so repurchased will be deposited into the related STACR SPI trust, which will then hold a 100% beneficial interest in the related mortgage loan.
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 STACR SPI trust and for distributions of principal and interest to investors. Investors in unguaranteed certificates may not receive full payments of either principal or interest on the certificates due to realized losses on the mortgage loans in the STACR SPI 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.
Key Differences Between STACR SPI and STACR DNA/HQA
- STACR SPI is a RMBS transaction issued under rule 144A of the Securities Act. STACR DNA/HQA transactions entail the issuance of unsecured debt; principal payments on the debt notes are based on a reference pool of mortgage loans.
- STACR SPI certificates receive a fixed interest rate, subject to the net WAC of the related mortgage loans. STACR DNA/HQA notes receive a floating interest rate at a spread over one month LIBOR.
- STACR SPI has a maturity date based on the latest maturity date of the underlying mortgage loans. STACR DNA/HQA has a 12.5-year legal final maturity date.
Other STACR SPI Securities Features
- In addition to the unguaranteed certificates sold to investors (subordinate certificates), a Class X certificate with an initial balance of $0 is issued by the STACR SPI trust and held by Freddie Mac.
- Upon repurchase of a participation interest from a PC trust and subsequent deposit into the SPI trust, the Class X certificate balance will be increased by the amount paid by Freddie Mac to PC investors to effect such repurchase.
- The Class X certificate has payment priority over the subordinate certificates. Realized losses are allocated reverse sequentially, beginning with the most junior subordinate certificate.
- Freddie Mac has credit risk exposure by holding the Class X certificate, and as of the closing date, retains a portion of each of the subordinate SPI securities.
STACR SPI Illustration