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CRE Finance World, Winter 2013

The Freddie Mac K Program: Quality, Stability, Liquidity Figure 4 K-Deal Guarantee Mechanics and Comparison Source: Freddie Mac Credit Quality of Underlying Freddie K Mortgage Loans The X3 IO is typically stripped off of the bottom of the deal and so Given that the K-program is only four years old, it is too early to is very sensitive to any credit events. draw conclusions as to the overall credit quality of the program. That said, the program is off to an excellent start with no bonds It is also important to note that Freddie Mac underwrites these having suffered losses and only one delinquent loan out of the loans according to its Capital Markets Execution (CME) guidelines almost 1,950 loans in the program in its first four years. As noted (see Figure 5) which are the same as those used for its on-balance above, Freddie Mac retains at least 50% of the X3 IO in each deal. sheet loans, the performance of which has been excellent. CRE Finance World Winter 2013 30


CRE Finance World, Winter 2013
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