McLEAN, VA—Freddie Mac has only released five Structured Agency Credit Risk (STACR) offerings but it has already gotten wind of a possible price arbitrage opportunity for broker dealers that it wanted to close. Which it has -- going forward Freddie Mac will now provide STACR preliminary payment disclosure on the 4th business day of the month following the release of PC disclosures instead of the 25th of that month.

"The STACR market is becoming more sensitive to prepayment speeds,” according to Mike Reynolds, Freddie Mac vice president of Credit Risk Transfer. By releasing the prepayment disclosure sooner, “we level the playing field for everyone.”

To be clear, Freddie Mac had no first hand knowledge of anyone using the old release schedule for pricing arbitrage. However, it had seen some research published by broker dealers that were analyzing the market using the old schedule, Reynolds explained.

Theoretically this is how it could have worked: First, understand that there is already an active secondary market for STACRs. Pre-payment information on mortgage-backed securities is released on the 4th business day of the month. While MBS does not correlate completely to STACRs, they do match up fairly well, Reynolds says. It was suspected that some investors were using the pre-payment information about the MBS coming out on the 4th to invest strategically in the STACR bonds. Investors that are able to access these calculations would have been better informed as they formulate their buying strategies compared to investors that had to make do with the prepayment information that was released on the 25th. Now both sets of data are released on the 4th.

Meanwhile, the GSE is getting ready to market its sixth STACR offering with its usual new twist: a first actual loss offering with high LTVs, specifically 80% to 95%. The first of additional offerings, the series will be called STACR HQA.

The $872 million offering, called STACR 2015-HQA1, will be the company's third transaction where losses will be allocated based on the actual losses realized on the related reference obligations instead of allocating losses using a fixed severity approach.

Freddie Mac is issuing 100 basis points of first loss. Freddie Mac holds the senior loss risk in the capital structure and a portion of the risk in the Class M-1, M-2 and M-3, and the first loss Class B tranche.

Bank of America Merrill Lynch and Nomura will serve as co-lead managers and joint bookrunners. Deutsche Bank and BNP Paribas are co-managers, and Williams Capital is a selling group member.