Among many other offerings, Federal Home Loan Mortgage Corp (OTCBB:FMCC) recently priced structured pass-through certificates, formally known as K-Certificates worth $1.3 billion. These certificates are heavily backed by multi-family mortgages carrying fixed rate of interest with tenure of 7 years. As per the reports, the company expects to settle these certificates on or before May 27, 2015. It’s the ninth time when Freddie Mac has come up with such certificates.
Insights On K-718 Pricing:
It has made available four classes of certificates i.e. A-1, A-2, X1 and X3. The A-1 class carries a principal or notional amount of $200 and weighted average life of 4.72 years. The principal amount of remaining certificate classes i.e. A-2, X1 and X3 are $1,096.33, $1,296.333 and $294.261 respectively. Their weighted average lives are 6.55 years, 5.93 years and 6.45 years respectively.
Freddie Mac has appointed Merrill Lynch, Pierce, Barclays Capital and Fenner & Smith Incorporated as the co-lead managers and joint book runners for this offering. Apart from them, CastleOak Securities, Guggenheim Securities, Citigroup Global Markets Inc., and Wells Fargo Securities, LLC as the co-managers. Morningstar Credit Ratings, LLC and Moody’s Investors Service, Inc. to work as the rating agencies for this k-certificate pricing.
All the K-718 certificates are guaranteed by Freddie Mac and backed by relative classes issued by FREMF 2015-K718 Mortgage Trust. Reports claim that K-718 trust will also look forward to issuing Class X2-A, X2-B, B, C, D and R Certificates which will not be backed by K-718 and guaranteed by Freddie Mac.
Freddie Mac Multifamily is one of the most prominent issuers of agency backed multifamily securities. Its prime objective is to transfer the risk of loss from taxpayers to private investors. K-Certificates will prove to be fitting investment options for investors who like to take a reasonable risk to ensure stable credit enhancement and structured cash flow.