Flexible Execution Options Help Optimize Your Liquidity
When you sell mortgages to Freddie Mac, you have a number of execution options available – some that give you cash in exchange for your mortgages and some that allow you to swap your loans for mortgage-backed securities. You can maximize your profits by leveraging the solutions that meet your needs, which may include a combination of cash sales and securitizations.
Get Quick Funding Through Cash Executions
Cash executions offer you the opportunity to sell loans and receive cash very quickly – in as little as 24 hours. By selling your mortgages to Freddie Mac for cash, you’ll recover capital for the mortgages you originate – so you'll always be able to better meet the lending needs of more borrowers in the communities you serve.
You have the option of selling the loans to Freddie Mac servicing-released, or delivering loans to Freddie Mac and retaining the servicing, depending upon your individual business needs.
Cash, Servicing-Released Execution
Choose a servicing-released sale option when mortgage servicing is not your core capability. This option allows you to maximize your servicing-released premiums for a variety of mortgage products and financing structures. With the servicing-released execution, you sell your mortgage asset and servicing asset in one transaction, and receive the all-in cash price that includes the servicing-released premium. Note that this cash execution is available only to Sellers that Freddie Mac has approved for this option.
Cash, Servicing-Retained Execution
Freddie Mac's cash, servicing-retained execution lets you retain your servicing asset and maintain direct contact with your customers. You can sell both premium and discount mortgages as long as their note rates are at or below our posted maximum eligible coupon.
Both our cash, servicing-released and servicing-retained executions offer mandatory or best efforts contract options. Depending upon your business needs, you can choose between the two options on a loan-by-loan basis. Learn more about each of these options:
- Best Efforts Commitment – Freddie Mac's best efforts commitment option reduces your interest rate and pipeline risk, providing greater control over all your secondary market activities. With this option, you can lock in competitive prices for fixed-rate cash contracts that become mandatory only if the loan closes. If the loan does not close, you will not be charged a pair-off fee for non-delivery.
- Mandatory Commitment – Mandatory commitments allow you to effectively manage interest rate risk, but not fall-out risk (the risk that hedged loans do not close). When you enter into a mandatory commitment with Freddie Mac, you agree to sell a specified dollar amount of loans to us at an agreed-upon price within a specified timeframe. If you are not able to fulfill the terms of your commitment with Freddie Mac, you will be subject to our pair-off policy.
Swap Loans for Securities to Manage Your Risk
Through a swap execution, you sell mortgages to Freddie Mac and receive a Freddie Mac Participation Certificate (PC) backed by mortgages in return. Whether you decide to hold the securities in your portfolio, reducing your bank’s risk-based capital requirements, or sell them to a dealer for cash to maximize your liquidity, swapping loans for PCs offers you more opportunities to:
- Address changes in interest rates and other trends that affect your net margins and the profitability of your mortgage holdings.
- Adjust your balance sheet based on market trends.
- Earn higher yields for different mortgage types.
Swapping your mortgages for securities allows you to continue earning the principal and interest on your loans while Freddie Mac takes on the risks that come with market and economic changes.
A Variety of SWAP Execution Options
Leverage the following securities execution options, with minimum commitment levels as low as $1,000 to meet your unique business needs:
- MultiLender swap execution –With MultiLender Swap, you can take out a commitment with an amount as low as $1,000, allowing you to reap the benefits of a securities execution with as little as one mortgage. MultiLender Swap gives you a pro-rata share of a Gold PC or a Giant PC that represents an undivided interest in a security with assets consisting of Gold PCs and/or other Giant PCs.
- Fixed-rate Guarantor execution – This option gives you Freddie Mac Gold PC’s backed exclusively by at least $1 million of your own fixed-rate mortgages. Use this execution to maximize your origination fee income and increase your servicing portfolio. With Fixed-rate Guarantor, the Gold PCs you obtain are backed exclusively by mortgages you’ve sold to Freddie Mac, allowing you to reap the benefits of the fast-paying conventional mortgage pass-through certificates.
- WAC ARM Guarantor execution – Freddie Mac's Weighted Average Coupon (WAC) ARM Guarantor is a competitive securities execution for your Constant Maturity Treasury (CMT)-indexed and London Interbank Offered Rate (LIBOR)-indexed ARMs. With a $500,000 minimum commitment you can receive a WAC ARM PC that is an attractive investment, providing you with an asset to match short-term liabilities and liabilities with floating rates.
As we transition from a refinance market to a purchase market, Freddie Mac remains committed to provide you with competitive sources of liquidity for your mortgage sales. To learn more about how to leverage our execution options, contact 800-FREDDIE or your Account Executive.