Freddie Mac Said to Plan $400 Million Sale of Risk-Sharing Debt

Freddie Mac plans to sell $400 million of a new type of debt tied to the risk that homeowners will fail to repay mortgages, according to a person with knowledge of the transaction.

The government-controlled mortgage-finance company is expected to begin marketing the bonds tomorrow in an offering managed by Credit Suisse Group AG, said the person, who asked not to be named because terms aren’t set.

The deal reflects an effort by the Federal Housing Finance Agency to reduce the role of Freddie Mac and Fannie Mae in the residential-mortgage market, where government-backed loans now account for more than 85 percent of lending. The FHFA, which has overseen the firms since they were seized in 2008, has been directing them to raise how much they charge to guarantee their traditional mortgage bonds and asked them to each attempt to share risk this year on $30 billion of home loans.

The new bonds being sold by McLean, Virginia-based Freddie Mac (FMCC) will be direct obligations of the company, rather than mortgage-backed securities, the person said.

The deal includes two floating-rate notes, each totaling $200 million, the person said. Their projected average lives are 2.2 years and 8.2 years, the person said.

To contact the reporters on this story: Christopher DeReza in New York at cdereza1@bloomberg.net; Jody Shenn in New York at jshenn@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.