Breaking News

U.S. May Home Prices Rise 0.4% From Previous Month: FHFA
Tweet TWEET

Freddie Mac Said to Boost Size of Risk-Sharing Mortgage Bonds

Freddie Mac (FMCC) increased the size of its sale of a new type of debt tied to the risk that homeowners will fail to repay their mortgages, according to a person with knowledge of the transaction.

The government-controlled mortgage-finance company may issue $500 million of the notes, up from $400 million, in the offering being 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 by the U.S. in 2008, has been directing them to raise how much they charge to guarantee their traditional mortgage bonds and asked each to attempt to share risk this year on $30 billion of home loans.

Investors are being drawn to the notes after McLean, Virginia-based Freddie Mac boosted the extra yield it’s willing to pay relative to benchmark interest rates, the person said. After those potential spreads widened last week following the announcement of the deal, the debt may be priced tighter than those levels, though still wider than in discussions before formal marketing began, the person said.

Photographer: Andrew Harrer/Bloomberg

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. Close

The deal reflects an effort by the Federal Housing Finance Agency to reduce the role of... Read More

Close
Open
Photographer: Andrew Harrer/Bloomberg

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.

A more senior-ranking portion of the debt may be sold at 3.4 percentage points more than the one-month London interbank offered rate, the person said. A junior-ranked slice may price at a spread of 7.15 percentage points, down from earlier guidance of 7.5.

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

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

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.