Freddie Mac Single-Family CRT Enters 2020...Source: “Housing Finance At a Glance: A Monthly...

Freddie Mac Single-FamilyCRT Enters 2020Tuesday, January 28, 2020, 1:30 ET

Today’s Speakers

Mike Reynolds, Presenter

Vice President

Credit Risk Transfer

Single-Family Portfolio Management2

Sonya Sheth, Host

Manager


Single-Family Fixed Income Marketing

Freddie Mac | 2020

Poll Question

What is your biggest concern in 2020 with respect to your participation in CRT?

A. Economic downturn

B. Interest rates

C. Performance

D. Liquidity

E. Spreads

F. Other

Agenda▪ Housing Market Overview

▪ Development of an Asset Class

▪ Program Trends and Performance

▪ CRT 2020

▪ Resources

▪ Q&A and Wrap Up

Housing Market Overview

Freddie Mac Single-Family CRT Enters 2020

Freddie Mac | 2020

Housing Market Size


6

0.60.8 0.8 0.9 1.0 1.1 1.2 1.3

1.5 1.1

0.5

0.9

1.0 0.7 0.5

0.8

2.1

1.9

1.3

1.8

2.1

1.81.7

2.1

2012 2013 2014 2015 2016 2017 2018 2019

Annual Single-Family Mortgage Originations ($ Trillions)

Source: Freddie Mac December 2019 Economic and Housing Research Outlook. Includes only 1st lien loans.

Refi

Purchase

Freddie Mac | 2020

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Serious Delinquency Rates Single-Family Loans

Fannie Freddie FHA VA

HPA and Delinquency Trends


7

3.39%

1.87%

0.67%

0.61%110

120

130

140

150

160

170

180

190

200

2005 2007 2009 2011 2013 2015 2017 2019

National Home Prices

Cumulative increase of 17.5% since June 2006 (NSA Series)

2019 Q3 Not

Seasonally Adjusted

(NSA) Index Growth:

(0.06%)

2019 Q3 Seasonally

Adjusted (SA)

Index Growth: (0.87%)

Freddie

Mac House

Price Index

(December

2000=100)

Source: Freddie Mac. Based on Freddie Mac’s single-family credit guarantee portfolio.

Note: Quarterly growth rates are calculated as a 3-month change based on the final month of each quarter. Historical

growth rates change as new data becomes available. Values for the most recent periods typically see the largest changes.

Cumulative increase, based on the NSA series, calculated as the percent change from June 2006 to September 2019.

Source: “Housing Finance At a Glance: A Monthly Chartbook,” Housing Finance Policy Center, December 2019; Fannie Mae,

Freddie Mac, MBA Delinquency Survey and Urban Institute.

Note: Serious delinquency is defined as 90 days or more past due or in the foreclosure process. Not seasonally adjusted.

Freddie Mac | 2020

Serious Delinquency Rates During Recessions


Sources: MBA National Delinquency Survey and Freddie Mac Purchase Only House Price Index SA (WRSI) from 1976Q1.

Note: The serious delinquent rate is defined as the rate of mortgage loans that are past due 90 Days and above or in foreclosure, as a percentage of the number of loans serviced during the quarter. The survey sample includes

about 85% of the U.S market for first-lien 1-4-unit mortgages.

-15

-10

-5

0

5

10

15

20

0

1

2

3

4

5

6

1972Q4 1975Q4 1978Q4 1981Q4 1984Q4 1987Q4 1990Q4 1993Q4 1996Q4 1999Q4 2002Q4 2005Q4 2008Q4 2011Q4 2014Q4 2017Q4

HP

A %

SD

Q %

Nov 73–Mar 75 Jan–Jul 80 Jul 90–Mar 91 Mar 01–Nov 01 Dec 07–Ju 09

1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017

Jul 81–Nov 82

Freddie Mac | 2020

Homeownership Demographics


9

4.0

4.1

4.2

4.3

4.4

4.5

4.6

4.7

4.8

4.9

5.0

18

19

20

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

36

37

38

39

40

Age Cohort

Largest Age Cohorts in the U.S.

Peo

ple

in

2018 (

Millio

ns)

Median Age of First

Time Home Buyer

Gen Z Millennial Gen X

Source: U.S. Census Bureau.

77%

67%

43%

23%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Baby Boomer

Gen X

Millennial

Gen Z

Homeownership Rates by Generation

Source: U.S. Census Bureau, 2019 Current Population Survey Annual Social and Economic Supplement (CPS ASEC).

Total U.S.

Homeownership

Rate is 66%

Freddie Mac | 2020

Forecast


Sales

▪ Low interest rates, modest inflation and a solid labor market have primed the U.S. housing for modest growth in 2020

▪ We expect home sales to increase from 6 million in 2019 to approximately 6.2 million in 2020

Rates

▪ We expect the 30-year mortgage rate to remain low, averaging 3.5% to 3.75% throughout 2020

▪ Surge in 2019 refinance activity ($846 billion) should slow to about $650 billion if mortgage rates hold steady in 2020

Prices

▪ Increase in home sales and house prices should boost purchase originations from $1.26 trillion in 2019 to $1.33 in 2020

▪ We expect house price growth to continue to decelerate in 2020 to an annual rate of 2.8%, down from 3.2% in 2019

10

Opinions, estimates, forecasts, and other views contained in this document are those of Freddie Mac's Economic & Housing Research group, do not necessarily represent the views of Freddie Mac or its management, and should

not be construed as indicating Freddie Mac's business prospects or expected results. Although the Economic & Housing Research group attempts to provide reliable, useful information, it does not guarantee that the information

or other content in this document is accurate, current or suitable for any particular purpose. All content is subject to change without notice. All content is provided on an “as is” basis, with no warranties of any kind whatsoever.

Information from this document may be used with proper attribution. Alteration of this document or its content is strictly prohibited.

Development of an Asset Class


Freddie Mac | 2020

Timeline


12

2012

Developed Concept• Freddie Mac Single-Family

CRT team established

Established Market• Issued first STACR and

ACIS transactions (60-80%

LTV fixed-rate collateral)

2013

2014

2015

Created Scale and Depth• Began transferring actual

loss in lieu of fixed severity

2016

Expanded Opportunity• Issued first ACIS 15-year

standalone transaction

Generated Momentum • Introduced HQ series

(>80% LTV)

Strengthened Structure• Issued first STACR Trust

transaction

• Issued Class B-2 notes

and extended STACR

term to 30 years

• Launched IMAGIN,

(Integrated Mortgage

Insurance)

Leveraged Success• Issued first FTR

transaction

(seasoned B-2 notes)

• Released Clarity data

intelligence portal

• Issued first STACR

REMIC transaction

2018

Broadened Focus• Issued first STACR

HARP transaction

2017 2019

2020

Driving to Exit

Conservatorship

Freddie Mac | 2020

CRT by the Numbers


Source: Freddie Mac, as of 12/31/2019. Includes all Single-Family CRT programs and UPB at issuance.

Note: Average trading per month in secondary market for 2019. Portion of single-family portfolio with credit risk protection as of earnings reported 9/30/2019.

7Years Since First Transaction

120+Transactions Issued Across

Single-Family CRT Offerings

245+Unique Investors in

Single-Family CRT Offerings

$2 BillionAverage Trading per Month

in Secondary Market

$53 Billion Risk Transferred to Private Capital on

Single-Family Mortgages

$1.4 Trillion

Single-Family Mortgages

with Credit Risk Protection

49% Portion of Single-Family Portfolio

with Credit Risk Protection

90%+Credit Risk Transfer Rate on Eligible,

Newly-Acquired Single-Family Mortgages

RMBS Deal of the Year

2019

Freddie Mac | 2020

Key Offerings


14

Series

DNA

On-the-run, original LTV of 61-80%

HQA

On-the-run, original LTV of 81-97%SAP

15-year loans

ARMR and FTR

Off-the-run loans

Series

DNA

On-the-run, original LTV of 61-80%

HQA

On-the-run, original LTV of 81-97%HRP and FTR

Off-the-run loans

SECURITIES (RE)INSURANCE CONTRACTS

Program Trends and Performance


Freddie Mac | 2020

Clarity


16

Freddie Mac’s data intelligence portal for the CRT community.

Clarity’s preset configurations offer quick, clear

views into Freddie Mac CRT data and make it

easy for any user to get valuable insights

quickly. Easily export and download charts to

your desktop – it’s that simple.

Advanced Filters for Quick

Performance Analysis

Clarity’s data visualizations enhance

understanding with crisp, clear information

design that makes it easy to spot trends and

zero in on key figures.

Data Visualizations Bring

Raw Numbers to Life

• Transaction proxy loss analysis.

• Download STACR and ACIS monthly

transaction data.

• Analysis for Automated Collateral

Evaluation® (ACE).

New Clarity Features

Now Available

Clarity.FreddieMac.com

Freddie Mac | 2020

Collateral Profile


Low-LTV FICO < 680 (%) Original LTV DTI > 45 (%) Collateral WAC (%) Investment Property (%) Home Possible (%) ACE (%)

2019-DNA1 8.9% 75.9 18.4 4.73 11.0 2.79 3.97

2019-DNA2 8.6% 76.1 18.8 4.85 9.2 4.22 5.80

2019-DNA3 7.7% 76.0 18.6 4.91 9.7 2.63 5.13

2019-DNA4 7.3% 76.0 17.2 4.91 10.7 2.26 6.14

2020-DNA1 6.5% 76.1 15.7 4.54 8.6 2.43 11.11

Average 7.7% 76.0 17.6 4.77 9.8 2.82 6.65

Source: Freddie Mac Clarity. Note: Amounts shown are as of issuance.

High-LTV FICO < 680 (%) Original LTV DTI > 45 (%) Collateral WAC (%) Investment Property (%) Home Possible (%) ACE (%)

2019-HQA1 5.5 92.7 15.5 4.66 0.4 26.17 0.00

2019-HQA2 5.7 92.6 16.2 4.79 0.4 30.44 0.00

2019-HQA3 5.5 92.5 16.0 4.88 0.5 24.26 0.00

2019-HQA4 5.8 92.3 15.6 4.93 0.5 22.99 0.00

2020-HQA1 4.6 92.4 12.9 4.49 0.3 23.08 0.00

Average 5.4 92.5 15.1 4.72 0.4 25.43 0.00

Freddie Mac | 2020

Serious Delinquencies


18

The performance of 2009 and 2010 vintages are dramatically better than pre-crisis vintages despite falling house

prices in their early years.

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96

Pre-Crisis Cumulative D90 by Vintage

1999 2000 2001 2002 2003

2004 2005 2006 2007 2008

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96

Post-Crisis Cumulative D90 by Vintage

2002 2009 2010 2011 2012 2013

2014 2015 2016 2017 2018

Source: Derived from Freddie Mac’s Single-Family Loan Level Dataset (SF LLD), as of November 2019 refresh: Originations: 1999-September 30, 2018. Performance data: 1999-March 31, 2019.

Note: Loans with an LTV between 60% and 97%, Fixed Rate with term between 241-360.

Freddie Mac | 2020

CRT Performance


19

Source: Freddie Mac monthly remittance data, as of December 2019.

0.0

0.2

0.4

0.6

0.8

1.0

DNA HQA DNA HQA DNA HQA DNA HQA DNA HQA

2015 2016 2017 2018 2019

Average Cumulative Net Losses by Issuance Year (bps)

Freddie Mac | 2020

Rating Agency Upgrades


20

Over 160 STACR bonds have been upgraded from original to current rating since program inception, with zero downgrades.

Source: Bloomberg, ratings as of January 2020 for on-the-run DNA/HQA transactions since 2013. Note: Class M-2 bonds from transactions with three mezzanine classes are excluded from the above analysis.

Front-End

Mezzanine

Current

Above IG IG Non IG

Issuance

Above IG 48%

IG 28% 25%

Non IG

Back-End

Mezzanine

Current

Above IG IG Non IG

Issuance

Above IG

IG 2%

Non IG 23% 35% 40%

Freddie Mac | 2020

STACR Liquidity


21

0%

2%

4%

6%

8%

10%

12%

14%

16%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec

2019

% o

f Ou

tsta

nd

ing

UP

BN

om

inal

Am

ou

nt

($b

illio

ns)

Monthly Trading Volume Over Trailing 12 Months

Nominal ($billions) % of Outstanding UPB

Source: Bloomberg, as of December 2019. Note: Trading volumes reflect the sum of all buy and sell trades.

CRT 2020


Freddie Mac | 2020

STACR and ACIS Issuance Calendar

CRT 2020

20 On-the-Run Deals

▪ Ten STACR and ten ACIS on-

the-run transactions, including

both low (DNA) and high

(HQA) LTV offerings

Additional Off-the-Run Deals

▪ Pending market conditions,

STACR/ACIS transactions

covering seasoned collateral

as well as ACIS15-year and

forward deals

2020 = $12–$16 Billion

Freddie Mac retains sole discretion over whether or not the issuances come to market and the timing thereof, which may be impacted by market conditions. As such, the information contained

in this document does not guarantee the timing of any future Freddie Mac offerings or the type of such offerings, or the amount of such offerings. This document is related to on-the-run

transactions. Freddie Mac may, pending market conditions, bring additional off-the-run deals. This document may be amended, superseded or replaced. Please use this issuance calendar for

informational purposes only. This document is not an offer to sell any Freddie Mac securities.

Freddie Mac | 2019

▪ Continue to transfer a significant amount of credit risk to private markets in a commercially reasonable and safe and sound manner

▪ Undertake actions to meet single-family and multifamily credit risk transfer objectives established by FHFA

▪ Actively pursue legacy asset risk transfer activities, including sales of non-performing loans and re-performing loans

▪ Under FHFA direction, undertake a comprehensive review of the credit risk transfer program, including a cost-benefit analysis

▪ As the Federal Housing Finance Agency (FHFA) lays out their milestones for existing conservatorship, Freddie Mac will:

▪ Execute them in a safe and sound manner

▪ Continue to fulfill our mission and service our clients through focusing on our key strategic pillars: performance, platform and people

▪ Be a consistent issuer in the CRT space, printing economically sensible deals to support the strong demand for CRT

24

Driving to Exit Conservatorship

CRT 2020

FHFA 2020 Scorecard for GSEs Freddie Mac’s Key Focus For 2020

Freddie Mac | 2020

Other Key Focuses

CRT 2020

Issuing off-the-run transactions

▪ Freddie Mac CRT will look to issue a number of off-the run deals in 2020, pending market conditions, for both STACR and ACIS consisting of HARP collateral and seasoned B-2 notes (FTR) as well as ACIS 15-year (SAP) and forward (AFRM) deals

Reducing the pipeline

▪ Another big initiative is to reduce the “the pipeline,” or the amount of time between when Freddie Mac issues a MBS guarantee and a related CRT transaction

Transitioning away from LIBOR

▪ Freddie Mac is also working on migration plan to transition the STACR program away from being a LIBOR-based structure, which will be announced to the market in the first half of the year

25

Resources


Freddie Mac | 2020

Freddie Mac Key Contacts and Resources

Resources

27


Fixed Income Marketing

Websites CRT.FreddieMac.com | Clarity.FreddieMac.com

Mike Reynolds Vice President

[email protected]

(571) 382-4852

Christian ValenciaDirector

[email protected]

(571) 382-3727

Charlotte Gladwin Director

[email protected]

(571) 382-3732

Jeff ShueDirector

[email protected]

(571) 382-3023

Sonya ShethFixed Income Marketing, Manager

[email protected]

(571) 382-4376

Freddie Mac | 2020

Engagement Opportunities

Resources

28

SFIG West 2020February 23-26 | 2020

Aria Conference CenterLas Vegas, NV

IMN CRT SymposiumApril 29 | 2020

Conrad New YorkNew York, NY

Single-Family Investor DayJune 11 | 2020

Freddie Mac HeadquartersMcLean, VA

Q&A


Disclaimers

Freddie Mac | 2020

Safe Harbor Statements

Disclaimers

Freddie Mac obligationsFreddie Mac’s securities are obligations of Freddie Mac only. The securities, including any

interest or return of discount on the securities, are not guaranteed by and are not debts or

obligations of the United States or any federal agency or instrumentality other than Freddie

Mac.

No offer or solicitation of securities This presentation includes information related to, or referenced in the offering documentation

for, certain Freddie Mac securities, including offering circulars and related supplements and

agreements. Freddie Mac securities may not be eligible for offer or sale in certain jurisdictions

or to certain persons. This information is provided for your general information only, is current

only as of its specified date and does not constitute an offer to sell or a solicitation of an offer to

buy securities. The information does not constitute a sufficient basis for making a decision with

respect to the purchase or sale of any security. All information regarding or relating to Freddie

Mac securities is qualified in its entirety by the relevant offering circular and any related

supplements. Investors should review the relevant offering circular and any related

supplements before making a decision with respect to the purchase or sale of any security. In

addition, before purchasing any security, please consult your legal and financial advisors for

information about and analysis of the security, its risks and its suitability as an investment in

your particular circumstances.

Forward-looking statements Freddie Mac's presentations may contain forward-looking statements, which may include

statements pertaining to the conservatorship, the company’s current expectations and

objectives for its Single-family Guarantee, Multifamily and Capital Markets segments, its efforts

to assist the housing market, liquidity and capital management, economic and market

conditions and trends, market share, the effect of legislative and regulatory developments and

new accounting guidance, credit quality of loans the company owns or guarantees, the costs

and benefits of the company’s credit risk transfer transactions, and results of operations and

financial condition on a GAAP, Segment Earnings, non-GAAP and fair value basis. Forward-

looking statements involve known and unknown risks and uncertainties, some of which are

beyond the company’s control. Management’s expectations for the company’s future

necessarily involve a number of assumptions, judgments and estimates, and various factors,

including changes in market conditions, liquidity, mortgage spreads, credit outlook, actions by

the U.S. government (including FHFA, Treasury and Congress), and the impacts of legislation

or regulations and new or amended accounting guidance, could cause actual results to differ

materially from these expectations. These assumptions, judgments, estimates and factors are

discussed in the company’s Annual Report on Form 10-K for the year ended December 31,

2018, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, which are available

on the Investor Relations page of the company’s website at www.freddiemac.com/investors

and the SEC’s website at www.sec.gov. The company undertakes no obligation to update

forward-looking statements it makes to reflect events or circumstances occurring after the date

of this presentation.

31

Freddie Mac | 2020

Disclaimer

Disclaimers

Notice to all Investors:

This presentation (“Presentation”) is not an offer to sell any Freddie Mac securities. Offers for any given security are

made only through applicable offering circulars and any related supplements, which incorporate Freddie Mac's

Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 14, 2019, and

all documents that Freddie Mac files with the SEC pursuant to Section 13(a), 13(c) or 14 of the Exchange Act,

excluding any information "furnished" to the SEC on Form 8-K. Content in this Presentation is not reflective of

current markets/spreads and is not indicative of any future Freddie Mac offerings. Please use this Presentation for

informational purposes only.

Notice to United Kingdom Investors:

This Presentation is only being distributed to and is directed at: (a) investment professionals falling within Article 19

of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "FPO"); (b) high net worth

entities falling within Article 49 of the FPO; and (c) other persons in respect of whom exemptions under the FPO are

available. The investments to which this Presentation relates are available only to, and any agreement to acquire

such investments, will be made only with, such persons. Any other person should not act or rely on this

Presentation or any of its contents.

This Presentation is not intended to be an offer of transferable securities to the public in the United Kingdom or any

European Union jurisdiction, in accordance with the Prospectus Directive (2003/71/EC, as amended). In any event,

this Presentation is made available only in circumstances in which a prospectus requirement under such Directive

does not apply, including but not limited to the distribution of this Presentation to qualified investors only.

Notice to Canadian Investors:

This Presentation is confidential and may not be reproduced or transferred, in whole or in part, to any other party

that is not an employee, officer, director, or authorized agent of the recipient without the express written consent of

Freddie Mac. Each person accepting these materials agrees to return them promptly upon request.

The material provided herein is for informational purposes only and delivered solely as reference material with

respect to Freddie Mac. The Presentation does not constitute an offer to sell or a solicitation of an offer to buy any

securities of Freddie Mac. Any offering of securities of Freddie Mac will occur only in accordance with the terms

and conditions set forth in an offering circular (“Offering Circular”). Investors are strongly urged to carefully review

the Offering Circular (including the risk factors described therein) and to discuss any prospective investment in

Freddie Mac with their legal and tax advisers in order to make an independent determination of the suitability and

consequences of an investment.

No person has been authorized to give any information or to make any representation, warranty, statement or

assurance not contained in the Offering Circular and, if given or made, such other information or representation,

warranty, statement or assurance must not be relied upon.

Prospective investors should inform themselves and take appropriate advice as to any applicable legal

requirements and any applicable taxation and exchange control regulations in the countries of their citizenship,

residence or domicile which might be relevant to the subscription, purchase, holding, exchange, redemption or

disposal of any securities of Freddie Mac.

Targets shown in this Presentation are objectives and should not be construed as providing any assurance or

guarantee as to the results that may be realized in the future from investment in any asset or asset class described

in the Presentation. Please be advised that any targets shown in the Presentation are subject to change at any

time and are current as of the date of this Presentation only. In addition, the information contained herein includes

observations and/or assumptions and involves significant elements of subjective judgment and analysis. No

representations are made as to the accuracy of such observations and assumptions and there can be no

assurances that actual events will not differ materially from those assumed. In the event any of the assumptions

used in the Presentation do not prove to be true, results are likely to vary substantially from those discussed therein.

Notice to Spain Investors:

No action has been or will be taken by Freddie Mac that would permit a public offering of the STACR securities in

Spain. Neither the STACR securities nor the offering have been or will be registered or approved by the Spanish

Securities Market Commission (Comisión Nacional del Mercado de Valores) and, therefore, no prospectus has

been or will be registered or approved by the CNMV for the purposes of this offering.

A prospective investor in securities of Freddie Mac must conduct its own independent review and due diligence to

make its own assessment of the merits and risks of making an investment in, perform its own legal, accounting and

tax analysis and conclude that the investment in the securities of Freddie Mac (i) is fully consistent with the

investor’s financial requirements and financial condition, investment objectives and risk tolerance; (ii) complies and

is fully consistent with all investment policies, guidelines and restrictions applicable to the investor; and (iii) is a fit,

proper and suitable investment for the investor.

32

Freddie Mac Single-Family CRT Enters 2020...Source: “Housing Finance At a Glance: A Monthly...

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