Freddie Mac Launches New Front-End Risk Transfer Offering

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Fitch Assigns Final Ratings to FREMF 2016-K57 Multifamily Mtg PT Ctfs & Freddie Mac SPC, Ser K-057

NEW YORK–(BUSINESS WIRE)–Fitch Ratings has assigned the following ratings and Rating Outlooks to
FREMF 2016-K57 Multifamily Mortgage Pass-Through Certificates and
Freddie Mac Structured Pass-Through Certificates series K-057:

FREMF 2016-K57 Multifamily Mortgage Pass-Through Certificates

–$119,521,000 class A-1 ‘AAAsf’; Outlook Stable;

–$865,000,000 class A-2 ‘AAAsf’; Outlook Stable;

–$55,956,000 class A-M ‘A+sf’; Outlook Stable;

–$984,521,000* class X1 ‘AAAsf’; Outlook Stable;

–$55,956,000* class XAM ‘A+sf’; Outlook Stable;

–$984,521,000* class X2-A ‘AAAsf’; Outlook Stable;

–$48,394,000 class B ‘BBB+sf’; Outlook Stable;

–$30,246,000 class C ‘BBB-sf’; Outlook Stable.

Freddie Mac Structured Pass-Through Certificates, Series K-057

–$119,521,000 class A-1 ‘AAAsf’; Outlook Stable;

–$865,000,000 class A-2 ‘AAAsf’; Outlook Stable;

–$55,956,000 class A-M ‘A+sf’; Outlook Stable;

–$984,521,000* class X1 ‘AAAsf’; Outlook Stable;

–$55,956,000* class XAM ‘A+sf’; Outlook Stable.

*Notional amount and interest only.

Fitch did not rate the following classes of FREMF 2016-K57: $169,380,042
interest-only class X3, $225,336,042 interest-only class X2-B, or
$90,740,042 class D.

Additionally, Fitch did not rate the following class of Freddie Mac
Structured Pass-Through Certificates, Series K-057: $169,380,042
interest-only class X3.

The certificates represent the beneficial interests in a pool of 72
commercial mortgages secured by 72 properties. The Freddie Mac
Structured Pass-Through Certificates series K-057 (Freddie Mac SPC
K-057) represents a pass-through interest in the corresponding class of
securities issued by FREMF 2016-K57. Each Freddie Mac SPC K-057 security
has the same designation as its underlying FREMF 2016-K57 class. All
loans were originated specifically for Freddie Mac by approved Seller
Servicers. The certificates follow a sequential-pay structure.

Fitch reviewed a comprehensive sample of the transaction’s collateral,
including site inspections on 62.1% of the properties by balance and
cash flow analysis of 77.8% of the pool.

The transaction has a Fitch stressed debt service coverage ratio (DSCR)
of 1.05x, a Fitch stressed loan-to value (LTV) of 116.1%, and a Fitch
debt yield of 7.35%. Fitch’s aggregate net cash flow represents a
variance of 9.10% to issuer cash flows.

KEY RATING DRIVERS

Higher Leverage Consistent with Recent Transactions: The pool’s Fitch
DSCR and LTV are 1.05x and 116.1%, respectively. These levels represent
slightly lower leverage than the Fitch-rated 2016 YTD DSCR and LTV for
10-year, K-series Freddie Mac deals of 1.02x and 116.4%, respectively,
but higher leverage than the respective 2015 averages of 1.08x and 115%.
In addition, 58.8% of the loans in the pool have a Fitch DSCR lower than
1.00x; the average 2016 YTD percentage is 59.2%.

Limited Amortization: The pool is scheduled to amortize 9.4% of the
initial pool balance prior to maturity, below the Fitch-rated Freddie
Mac 10-year 2016 YTD and 2015 averages of 10.8% and 10.2%, respectively.
Fifteen loans (21.7%) are full-term interest-only, and 48 loans (71.2%)
are partial interest-only. The remaining loans (7.2%) are amortizing
balloon loans with a term of 10 years.

More Concentrated than Other Recent Freddie Mac Transactions: The top 10
loans comprise 42.2% of the pool, which is higher than the Fitch-rated,
Freddie Mac, 10-year 2016 YTD and 2015 averages of 33.8% and 33.2%,
respectively. The largest loan in the pool, Chelsea Ridge Apartments,
represents 7.7% of the pool, while the second largest loan, Sterling
Pointe, represents 6.5% of the pool.

Low Mortgage Coupons: The pool’s weighted average coupon is 4.15%, well
below historical averages and slightly less than the 2016 YTD,
Fitch-rated, 10-year, K-series Freddie Mac average of 4.22%. Fitch
accounted for increased refinance risk in a higher interest rate
environment by reviewing an interest rate sensitivity that assumes an
interest rate floor of 4.5% for multifamily properties, in conjunction
with Fitch’s stressed refinance rates, which were 8.57% on a weighted
average basis.

RATING SENSITIVITIES

Fitch performed two model-based break-even analyses to determine the
level of cash flow and value deterioration the pool could withstand
prior to $1 of loss being experienced by the ‘BBB-sf’ and ‘AAAsf’ rated
classes. Fitch found that the FREMF 2016-K57 pool could withstand a
46.4% decline in value (based on appraised values at issuance) and an
approximately 22.0% decrease to the most recent actual cash flow prior
to experiencing $1 of loss to any ‘AAAsf’ rated class.

Additionally, Fitch found that the pool could withstand a 39.1% decline
in value and an approximately 11.4% decrease in the most recent actual
cash flow prior to experiencing $1 of loss to the ‘BBB-sf’ rated class.

USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10

Fitch was provided with third-party due diligence information from
Deloitte Touche LLP. The third-party due diligence information was
provided on Form ABS Due Diligence-15E and focused on a comparison and
re-computation of certain characteristics with respect to each of the 72
mortgage loans. Fitch considered this information in its analysis and
the findings did not have an impact on its analysis. A copy of the ABS
Due Diligence Form-15E received by Fitch in connection with this
transaction may be obtained through the link contained on the bottom of
the related rating action commentary.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01
Sep 2016)
https://www.fitchratings.com/site/re/886006

Criteria for Analyzing Multiborrower U.S. and Canadian Commercial
Mortgage Transactions (pub. 01 Jul 2016)
https://www.fitchratings.com/site/re/882237

Criteria for Rating Caps and Limitations in Global Structured Finance
Transactions (pub. 16 Jun 2016)
https://www.fitchratings.com/site/re/882401

Global Structured Finance Rating Criteria (pub. 27 Jun 2016)
https://www.fitchratings.com/site/re/883130

Rating Criteria for Structured Finance Servicers (pub. 01 Jul 2016)
https://www.fitchratings.com/site/re/884140

Rating Criteria for U.S. Commercial Mortgage Servicers (pub. 14 Feb 2014)
https://www.fitchratings.com/site/re/735382

U.S. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S.
Re-REMIC Criteria (pub. 13 Nov 2015)
https://www.fitchratings.com/site/re/873395

Related Research

FREMF 2016-K57 Multifamily Mortgage Pass-Through Certificates and
Freddie Mac Structured Pass-Through Certificates, Series K-057 —
Appendix
https://www.fitchratings.com/site/re/887526

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1012368

ABS Due Diligence Form 15E 1
https://www.fitchratings.com/creditdesk/press_releases/content/ridf15E_frame.cfm?pr_id=1012368flm_nm=15e_1012368_1.pdf

Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1012368

Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2detail=31

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Freddie Mac: 30-year FRM hits 10-week low | 2016-09-29 …

After the Federal Open Market Committee failed to raise interest rates in its September meeting, investors flocked to safer grounds, and pushed the 30-year mortgage to a 10-week low.

“Investors flocked to the safety of government bonds causing the 10-year Treasury yield to continue its descent following the FOMC’s decision to leave rates unchanged,” Freddie Mac Chief Economist Sean Becketti said. “The 30-year fixed-rate mortgage responded by dropping six basis points before landing at 3.42%—a ten-week low.”

At the conclusion of its meeting, the FOMC announced it decided not to raise interest rates in September.

While the committee said that the case for an increased has strengthened, they decided to wait for further evidence on continued progress towards its objectives.

Click to Enlarge

(Source: Freddie Mac)

The 30-year fixed-rate mortgage decreased to 3.42% for the week ending September 29, 2016. This is down from last week’s 3.48% and last year’s 3.85%.

The 15-year FRM also decreased to 2.72%, down from last week’s 2.76% and last year’s 3.07%.

The five-year Treasury-indexed hybrid adjustable-rate mortgage, on the other hand, increased to 2.81%. This is up from last week’s 2.8%, but still down from last year’s 2.91%.

“The course of the economy is uncertain, yet consumers continue to be a bright spot,” Becketti said. “The September consumer confidence index is up 3% to 104.1, exceeding forecasts and reaching a new cycle high.”

Consumer confidence hit its highest level in nine years, right about when the last recession began, according to the Consumer Confidence Survey conducted by The Conference Board by Nielsen, a provider of information and analytics around what consumers buy and watch.

This Is Why The Housing Market Can’t Keep Up With New Buyer Demand

Despite it’s bounce back from the recession, the housing market has a new issue: It can’t keep up with the demand of potential home buyers.

Nearly half (47%) of homes on the market today sold in less than a month, according to the National Association of Relators. But with that kind of demand, there’s just not enough homes on the market to keep up.

“It’s an inventory issue that is really holding the market back,” says Charlie Young, CEO of Coldwell Banker, in an interview with Fortune live host Leigh Gallagher.

And that demand is expected to only increase, according to Young, as more first time home buyers are starting to come back into the market (before, the post recession housing market was fueled by luxury home sales, but that sector of the market is becoming more normalized, he says).

As for where the most expensive markets are? Buyers should look to California, but more specifically, Silicon Valley. According to the 2016 Coldwell Banker Home Listing’s report, which compares average four-bedroom homes in in 2,1000 markets around the country, California boasted the priciest homes, with the average home listing for over $2 million.

But thanks to Millennials, who are a large majority of the new age of buying consumers, cities like Detroit, Mich., are seeing a comeback. An average home there is a modest $64,000, Young says. He adds that less expensive homes on the market can also be found in the Midwest and South.

For their full conversation, please watch the video at the top of this post.

Realtors celebrate 100-year anniversary amid changing industry

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Pending home sales fall 2.4% in third straight drop

“Contract activity slackened throughout the country in August except for in the Northeast, where higher inventory totals are giving home shoppers greater options and better success signing a contract,” said Lawrence Yun, NAR’s chief economist. “In most other areas, an increased number of prospective buyers appear to be either wavering at the steeper home prices pushed up by inventory shortages or disheartened by the competition for the miniscule number of affordable listings.”

New home construction has not picked up much this year, with single family housing starts falling 6 percent in August compared to July, according to the U.S. Census. Yun warned that without bigger gains in home construction, the current housing recovery could stall. The supply of homes for sale has declined on an annual basis for 15 straight months, and homes are selling at a far quicker pace compared to a year ago.

The stark lack of supply continues to push home price gains. A monthly reading of home prices nationally in July by SP CoreLogic Case-Shiller showed a 5.1 percent annual gain, up from 5.0 percent in June. Prices also posted monthly gains.

‘Doc stamp’ tax on Freddie Mac, Fannie Mae deals is illegal, suit says

A proposed class-action suit says Florida has been illegally collecting real estate “doc stamp” taxes on homes bought from Fannie Mae and Freddie Mac.  

Richard A. Castorri filed suit last week in Leon County Circuit civil court against the Department of Revenue (DOR), court dockets show. He bought a house in Leon County from Fannie Mae in 2014, his suit says.

A Documentary stamp, or doc stamp, tax is levied on the sale of real estate.

The state collected nearly $2.1 billion in doc stamp revenue in 2015-16, DOR records show. Ten years earlier, during the real estate bubble before the Great Recession, it took in about twice that.

Fannie Mae and Freddie Mac are the nicknames for U.S. government-controlled companies that, among other things, buy residential mortgages and re-sell them to investors. They also sell homes they take over after foreclosures.

Castorri’s complaint alleges “real property transfers” involving the two companies “are completely exempt from all state taxation under federal and Florida law.”

The state’s land and water conservation program approved by voters as Amendment 1 in 2014 depends on doc stamp revenue, however.

The measure requires state officials to set aside 33 percent of doc stamp tax revenue to protect Florida’s environmentally sensitive areas for 20 years. This year, that number is expected to total more than $740 million.

Castorri’s suit points to the charters of Fannie Mae and Freddie Mac, which say all of their business activities, including home sales, “shall be exempt from all taxation … by any state, county, municipality, or local taxing authority.”

It contradicts the department’s rationale for charging doc stamp tax on such transactions: That private, non-governmental purchasers of real estate aren’t exempt.

They are, the complaint says, citing prior judicial decisions and non-binding attorney general opinions to bolster the point.

Castorri says he paid $238 in doc stamp tax when he bought his home in Tallahassee, but later asked for a refund, which DOR denied.

He wants the court to certify his case as a class action, with him as the “class representative.” His attorneys are Steven R. Jaffe of Fort Lauderdale and David W. Moyé of Tallahassee.  

A spokeswoman for the Department of Revenue says it does not comment on pending lawsuits.

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Freddie Mac Announces New Risk-Sharing Program

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BRIEF-Freddie Mac says total mortgage portfolio increased at annualized ra…


Sept 28 Freddie Mac

* Total mortgage portfolio increased at an annualized rate
of 8.2% in august

* Single-Family seriously delinquent rate decreased from
1.08% in july to 1.03% in august

* Multifamily delinquency rate decreased from 0.02% in july
to 0.01% in august

* Single-Family refinance-loan purchase and guarantee volume
was $21.2 billion in august

* Total number of loan modifications were 3,942 in august
2016 and 29,167 for the eight months ended august 31, 2016

* Mortgage-Related securities and other mortgage-related
guarantees increased at an annualized rate of 8.8% in august

Source text for Eikon:
Further company coverage:

Freddie Mac Announces New Mortgage Risk-Sharing Program | Fox …

Freddie Mac announced on Monday, September 26, that it would launch a new program to help reduce the risk it takes on various mortgages. The program will transfer backing to several private mortgage insurance companies. The loans included in this pilot program are those that were acquired by Freddie Mac starting September 1, 2016, and ending February 28, 2017. These loans must meet specific criteria to be shared among the private mortgage insurers (PMI).

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The program aims to share $100 million of financial backing on mortgages worth almost $4 billion. This amount is less than what many PMI companies had expected. Since discussion of the program, many PMI executives petitioned the Federal Housing Finance Agency (FHFA) to allow them to assume more of the risk. The FHFA, which oversees Freddie Mac, decided to hold back on sharing more of the risk.

Many PMI companies may be hesitant after seeing the structure of these deals. The FHFA requires any private company to provide extra collateral to join this program, and Freddie Mac will decide which insurers can be a part of the risk-sharing.

Senior Vice President of Credit Risk Transfer Kevin Palmer said that four different insurers are a part of the program at the moment, although he would not provide their names.

A similar program is currently being prepared for Fannie Mae.

This article was provided by our partners at moneytips.com.

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