New Freddie Mac Debt Seen as Imperfect Shift of Housing Risk
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Freddie Mac’s $500 million of risk-sharing debt sold yesterday may not give the firm as much protection against homeowner defaults as policy makers seek, according to Amherst Securities Group LP and Deutsche Bank AG.
The structure means that the company would be better off without the securities if refinancing and property sales are initially fast, and then defaults jump amid a real-estate slump, Amherst analysts led by Laurie Goodman wrote today in a report. In addition, it transfers less risk than needed to shield Freddie Mac from all but catastrophic levels of losses among mortgages, according to Deutsche Bank’s Christopher Helwig.