OVERVIEW Product Summary

AFRM transactions are insurance policies issued by or ceded to global (re)insurance companies to cover a portion of credit risk on reference pools of single-family mortgages. AFRM’s structure and cashflow mimics on-the-run ACIS transactions; however, ACIS reference pools include mortgages with six-to-nine months of seasoning. AFRM attaches insurance coverage for a certain period up to a pre-determined limit, on mortgages as soon as their purchases are funded by Freddie Mac.

Characteristics

  • Large, diversified reference pools
  • Multiple tranches to accommodate various risk appetites
  • (Re)insurers are only required to partially collateralize their limit, driven by counterparty ratings and tranche participation
  • Freddie Mac holds the senior risk, which is unfunded and not issued, a portion of the first-loss piece and at least 5% interest in each tranche
  • For >20-year mortgages: 12.5-year legal maturity, with early call option at year 5, and early redemption option at year 10
  • Call option(s) included in transactions provide flexibility as deals season
  • Premium scalar to adjust (re)insurers on credit drift during fill-up period

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credit_securities@freddiemac.com(866) 903-2767