McLEAN, VA—Freddie Mac upsized its first STACR offering in which losses are to be allocated based on the actual losses realized on the related reference obligations to $1.01 billion from the original $720 million. The GSE cited market demand for the paper, which it first announced earlier this month.

Freddie Mac introduced the product as both a balance sheet clean up tool as well as something the market had been requesting.

The actual loss STACR (which stands for Structured Agency Credit Risk) is structured similarly to other transactions in this product line, which the GSE first introduced last year.

STACR bonds transfers risk to private investors with Freddie Mac retaining the first loss position and a vertical slice of the bond. Before the debut of the actual loss STACR, they were done on fixed-loss criteria – a so-called fixed severity approach

This transaction also marks the first time the first-loss Class B tranche will be issued as book-entry notes.

Freddie Mac began pre-marketing the securities in the second week of April. It just announced the pricing for the securities.

• M-1 class was one-month LIBOR plus a spread of 90 basis points.
• M-2 class was one month LIBOR plus a spread of 185 basis points.
• M-3 class was one month LIBOR plus a spread of 330 basis points.
• B class was one month LIBOR plus a spread of 920 basis points.

The GSE is very happy with the initial positive demand from investors, according to Mike Reynolds, Freddie Mac vice president of Credit Risk Transfer.

"We see actual loss-based risk transfer as more sustainable over the long run than calculated loss risk transfer deals," he says in a prepared statement.

In an earlier interview with GlobeSt.com, Kevin Palmer, vice president of strategic credit costing and structuring, said that eventually the GSE wants to have all of its STACR offerings based on actual loss.

The first loss offering in many ways is closer to the way losses are handled in private-label securitizations, he says.

Credit Suisse is acting as the structuring lead manager, with Citigroup as a co-lead manager and joint bookrunner for STACR Series 2015-DNA1.

The reference pool consisted of seasoned single-family mortgages that originated in the fourth quarter of 2012 with an unpaid principal balance of more than $31.9 billion.

Freddie Mac holds the senior loss risk in the reference pool, and a portion of the risk in the Class M-1, M-2, M-3 and the first loss Class B tranche. The offering is scheduled to settle on or around April 28, 2015. Fitch and Moody's are rating the M-1, M-2, M-3 and MACR classes.