Freddie’s multifamily structured credit risk notes are structured on actual losses. Previous issuances were based on a fixed-severity formula, which created a gap between when losses were booked and reimbursed.
The latest transaction is an actual loss deal issued through a trust; previous Multifamily Structured Credit Risk deals were structured as fixed-severity deals issued as corporate debt.
The new PSPA will allow Freddie Mac and Fannie Mae to continue retaining earnings until they reach the regulatory minimum capital — almost $283 billion combined.
In a note to investors, Compass Point analyst Isaac Boltansky estimated that, with combined annual profits of about $21.4 billion, it will take 11 years for Fannie and Freddie to reach FHFA’s capital targets…
Rather than ending the net worth sweep outright and agreeing to write off some of its preferred shares, Treasury is essentially simply allowing Fannie Mae and Freddie Mac to continue their practice of retaining earnings.