We have assessed the senior-sub securitization structure Freddie proposed last week, finding it to be descended from the “MODERNs” structured MBS Freddie issued in 1998.  Then, the market was at best lukewarm to them, with Freddie able to issue only a single MODERNs securitization.  Now, the policy environment is right for risk shares with the private sector, but whether the private sector has the capacity to take this risk is uncertain even if FHFA were to allow Freddie to spread it around.

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