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» VISIT US ONLINE @ DSNEWS.COM 11 FREDDIE MAC UPDATE: $2.5B IN CREDIT RISK TRANSFER Freddie Mac's single-family business recently announced that its Credit Risk Transfer (CRT) program transferred approximately $2.5 billion of credit risk on $69 billion of single-family mortgages from U.S. taxpayers to the private sector in the third quarter of 2019. is brings the year-to-date total of credit risk transferred to $7.3 billion on $196 billion of single-family mortgages. "Freddie Mac is committed to the stability of the U.S. housing finance system, and CRT is a key component," said Mike Reynolds, VP, Credit Risk Transfer. "We will continue to offer attractive opportunities for private capital to participate in our program as we expand CRT coverage across our book of business." Freddie Mac issued a total of six STACR and ACIS transactions in the third quarter—three on-the-run deals (DNA and HQA) and three seasoned deals (ARMR and FTR). As a result of STACR and ACIS on the run transactions this quarter, Freddie Mac transferred between 80% (high LTV HQA series) and 90% (low LTV DNA series) of the credit risk on the underlying reference pools. Since the first CRT transaction in 2013, Freddie Mac's single-family CRT program has cumulatively transferred $51 billion in credit risk on nearly $1.4 trillion in mortgages. Freddie Mac posted a $1.7 billion net income for Q 3 2019. According to the GSEs, these incomes represent yet another step toward adding the capital necessary to move toward private ownership. "In the third quarter, Freddie Mac took an important first step toward exiting conservatorship by adding more than $1.8 billion to our total equity, bringing our capital reserve to $6.7 billion," said David M. Brickman, Freddie Mac CEO. "As we look to the future, we are squarely focused on serving our mission and meeting the milestones necessary to move the company forward." Freddie Mac reports that conservatorship capital reduced by $5.2 billion from the prior year, due in part to credit risk transfer (CRT) activity, home price appreciation, legacy asset dispositions, and a decrease in deferred tax assets. Freddie Mac also recently announced it sold via auction 2,243 non-performing residential first-lien loans (NPLs) from its mortgage-related investments portfolio. e loans, with a balance of approximately $369 million, are currently serviced by Specialized Loan Servicing LLC. e transaction is expected to settle in January 2020. e sale is part of Freddie Mac's Standard Pool Offerings. Winning bidders of this sale were InSolve Global Credit Fund IV, L.P. for Pool 1, VRMTG ACQ , LLC for Pools 2 and 3, Truman 2016 SC6, LLC for Pool 4. Freddie Mac, through its advisors, began marketing the transaction on October 8 to potential bidders, including nonprofits and Minority, Women, Disabled, LGBT, Veteran or Service-Disabled Veteran-Owned Businesses, neighborhood advocacy organizations, and private investors active in the NPL market. Bids for the upcoming Extended Timeline Pool Offering (EXPO), which is a smaller sized pool of loans, are due from qualified bidders by November 14, 2019. According to the FHFA, the purpose of the sale of non-performing loans (NPL) by the GSEs is to reduce the number of delinquent loans held in their inventories and transfers credit risk to the private sector. "e sales help achieve more favorable outcomes for borrowers and local communities than the outcomes that would be achieved if the Enterprises held the NPLs in their portfolios," the FHFA states. "e sales also help reduce losses to the Enterprises and to taxpayers." e NPLs sold by Fannie and Freddie as of December 31 had average delinquency of 1.4 to 6.2 years and an average loan-to-value ratio of 92%. Nearly half of the loans sold (45%) are from New Jersey, New York, and Florida. e FHFA stated that before the start of NPL program sales in 2015, these three states accounted for 47% of the GSE's loans that were one year or more delinquent. Given the delinquency status of the loans, the borrowers have likely been evaluated previously for or are already in various stages of loss mitigation, including modification or other alternatives to foreclosure, or are in foreclosure. Mortgages that were previously modified and subsequently became delinquent comprise approximately 63% of the aggregate pool balance. Additionally, purchasers are required to solicit distressed borrowers for additional assistance except in limited cases and ensure all pending loss mitigation actions are completed.

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