Agency-backed residential loans that were previously modified have been sold at auction and are headed for securitization.
A binding commitment has been reached to sell 846 Freddie Mac loans with an aggregate principal balance of $198,900,000.
The mortgages were originally closed as option adjustable-rate mortgages. However, the loans were subsequently modified.
The geographically diverse pool of loans has a weighted-average loan-to-value ratio of around 70 percent based on broker price opinions.
JP Morgan Chase Bank, N.A., is the servicer on the loans.
Freddie, which disclosed the sale on Tuesday, is selling the loans from its investment portfolio — which stood at $326 billion as of May 31.
The McLean, Virginia-based secondary lender originally announced plans to sell the loans last month.
Freddie noted that the transaction is a pilot structured sale of seasoned loans that the winner bidder — Chimera Investment Corp. — will purchase and securitize after it completes its collateral due diligence.
“Freddie Mac will guarantee and purchase the senior tranches of the securitization at par,” the statement said. “Freddie Mac may retain or sell the guaranteed senior tranches. The first loss subordinate tranche will be initially retained by the loan purchaser.
“A key requirement of this transaction is that the buyer of the loans, and therefore the subordinate tranche, has to be an investor with substantial experience in managing both ‘high-risk’ mortgage loans as well as in securitizations.”
Freddie expects the deal to settle in October.
