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44 FREDDIE MAC PRICES ITS LARGEST STRUCTURED AGENCY CREDIT RISK At the beginning of April, Freddie Mac priced a $1.32 billion Structured Agency Credit Risk (STACR), its largest STACR to date. Freddie Mac transfers a large portion of its mortgage credit risk on some groups of loans to private investors through STACR. » Pricing for STACR Series 2017-DNA2: » M-1 class was one-month LIBOR plus a spread of 120 basis points. » M-2 class was one month LIBOR plus a spread of 345 basis points. » B-1 class was one month LIBOR plus a spread of 515 basis points. » B-2 class was one month LIBOR plus a spread of 1,125 basis points. STACR 2017-DNA2 pools single-family mortgages with an unpaid principal balance (UPB) of approximately $60.7 billion, consisting of a subset of fixed-rate, single-family mortgages with an original term of 241 to 360 months acquired by Freddie Mac between July 1 and October 31 of 2016. e reference pool includes loans with loan-to-value (LTV) ratios ranging from 60–80 percent. 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 B-1 tranches and also a significant portion of the first loss risk in the B-2 tranche. Bank of America, Merrill Lynch, and Wells Fargo Securities are co-lead managers and joint bookrunners. Freddie Mac notes that this is not an offer to sell Freddie Mac securities. Instead, offers for any given security are made only through applicable offering circulars and related supplements, incorporating Freddie Mac's Annual Report on Form 10-k for 2016, filed with the Securities and Exchange Commission on February 16. Freddie Mac has transferred a large portion of credit risk on approximately $727 billion of UPB on single-family mortgages since 2013. e government-sponsored entity notes that since the introduction of STACR, as well as Agency Credit Insurance Structure and Whole Loan Securities, the company has since grown its investor base to more than 220 unique investors, including insurers and reinsurers. CONFORMING LOANS CAN'T KEEP UP According to a recent report, March saw an increase in mortgage credit availability. Analyzing data from Ellie Mae's AllRegs Market Clarity tool, the Mortgage Bankers Association (MBA) determined that its Mortgage Credit Availability Index (MCAI) increased 3.2 percent in March. e March MCAI was 183.4, indicating loosening credit. e index was benchmarked at 100 in March 2012. ree of the four component indices of the MCAI saw increase, with the Jumbo MCAI jumping 11.7 percent, followed by the Conventional MCAI (up 4.5 percent) and the Government MCAI (up 2.3 percent). Despite these increases, the Conforming MCAI decreased 2.6 percent. "Credit availability increased in March driven by increased availability of jumbo loan programs and government loan programs," said Lynn Fisher, MBA's VP of Research and Economics. "Led by a wave of adjustable-rate jumbo offerings, the Jumbo MCAI surged in March, more than offsetting its 4.4 percent decline in February, which was the first tightening of the that component index in 11 months. Increases observed in the Government MCAI were driven by increased availability of FHA's Streamline Refinance and 203(k) home rehabilitation loan programs." Although jumbo loans and government loans drive the MCAI increase, conforming loans access decreased by 2.6 percent. A blog post by Laurie Goodman from the Urban Institute ties this drop to high credit standards. Since 2009, 6.3 million fewer loans have been made, and as much as 1.1 million fewer loans were made in 2015 than would have been if credit standards from 2001 were still in effect. e Urban Institute states that lenders are imposing even more stringent standards than those required by the entities that guarantee or insure these loans. Additionally, midpriced homes, such as those with conforming loan balances, have seen price increases lately, and the MBA reported that interest rates for 30-year fixed-rate mortgages with conforming loan balances increased from 4.33 percent to 4.34 percent. INCREASING HOUSEHOLD DEBT AND HOMEOWNERSHIP On April 3, the New York Fed President and CEO William C. Dudley spoke on how household debt could reach its 2008 peak all over again later this year. "Following a period of steady deleveraging that began during the Great Recession, households have gradually increased their borrowing during the past three years," said Dudley. "Later this year, total household debt is expected to reach its previous peak from the third quarter of 2008. Given past experience, one might wonder whether this level of indebtedness is sustainable or a reason for concern." Household debt reached a peak of $12.7 trillion in Q 3 2008. Following the peak, debt declined for several years until recently. e past three years have seen a gradual increase in debt, reaching $12.6 trillion by Q 4 2016. Borrowers have shifted away from housing- related debt into student loan and auto debt. While housing-related debt remains at $1 trillion below peak level, auto loan and student loan debt has increased by $367 billion and $671 billion, respectively. e Fed's briefing ended with some notes on the state of student loans. e New York Fed noted that student loan debt has begun to level off, though still remains at a high level. Payment progress is particularly slow for those who borrowed more. Despite the debt, the New York Fed found that those with higher degrees are still more likely to become homeowners than those without. e gap grows even more with age. ose with bachelor's degrees and no debt become even more likely to own a home with age. at number increases even more for higher degrees. Even those who just attend college and don't graduate, and still hold debt, are more likely to become homeowners.

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