We have reviewed the pricing on Freddie’s most recent STACR transaction, which shows signs of market wariness over first-loss tranches even if Freddie stands by them and retains some of this risk. Mel Watt has said that deals like this one are experiments to test the Johnson-Crapo first-loss construct. To us, it shows how dependent they will be on market liquidity and related factors difficult to offset in a statutory framework without adding more back-up risk for the U.S. Taxpayer.
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