We have reviewed the details made public so far on Freddie’s first risk-share with private investors, a pending $400 million senior-sub issuance, with Freddie planning to sell an additional $200 million down the road in the $22.83 billion pool. This amounts to a 2.7% sub position in a way-safe book of mortgages (see below for details). If this doesn’t fly – and we’ll need to see pricing to tell – FHFA will hit a stumbling block along the way to meaningful risk-shares and the Corker-Warner 10% first-loss tranche will need to be re-examined for market viability (as, indeed, the senators reportedly have already begun to do).
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