Research: Rating Action: Moody’s Assigns Final Ratings to Freddie Mac STACR Remic Trust 2022-HQA3 CRT RMBS

New York, August 12, 2022 — Moody’s Investors Service (“Moody’s”) has assigned final ratings to 24 classes of residential mortgage-backed securities (RMBS) issued by Freddie Mac STACR Remic Trust 2022-HQA3 and sponsored by Freddie Mac.

Securities refer to a pool of mortgages acquired by Freddie Mac, and issued and serviced by multiple entities.

The full rating actions are as follows:

Issuer: Freddie Mac STACR Remic Trust 2022-HQA3

Cl. M-1A, A2 assigned (sf)

Cl. M-1B, Baa3 assigned (sf)

Cl. M-2A, Rated Ba1 (sf)

Cl. M-2B, Ba3 rated (sf)

Cl. M-2, Ba2 rated (sf)

Cl. M-2R, Ba2 rated (sf)

Cl. M-2S, Ba2 rated (sf)

Cl. M-2T, Ba2 rated (sf)

Cl. M-2U, Ba2 rated (sf)

Cl. M-2I*, Ba2 rated (sf)

Cl. M-2AR, Ba1 rated (sf)

Cl. M-2AS, Ba1 rated (sf)

Cl. M-2AT, rated Ba1 (sf)

Cl. M-2AU, Ba1 rated (sf)

Cl. M-2AI*, Ba1 rated (sf)

Cl. M-2BR, Ba3 rated (sf)

Cl. M-2BS, Ba3 rated (sf)

Cl. M-2BT, Ba3 rated (sf)

Cl. M-2BU, Ba3 assigned (sf)

Cl. M-2BI*, Ba3 rated (sf)

Cl. M-2RB, Ba3 rated (sf)

Cl. M-2SB, Ba3 rated (sf)

Cl. M-2TB, Ba3 rated (sf)

Cl. M-2UB, Ba3 rated (sf)

*Reflects interest categories only

RATINGS RATIONALE

Ratings are based on the credit quality of the mortgages, structural features of the transaction, quality of origination and management arrangement, third party review, and framework of representations and warranties.

Moody’s expected loss for this pool in a baseline scenario – the average is 0.90%, in a baseline scenario – the median is 0.70% and reaches 4.43% at a stress level consistent with Moody’s Aaa rating.

MAIN METHODOLOGY

The primary methodology used for rating all classes except interest-only classes was “Moody’s Approach to Rating US RMBS Using the MILAN Framework” published in July 2022 and available at https://ratings.moodys.com/api/rmc-documents/390484. The methodologies used for the rating of interest classes only were “Moody’s Approach to Rating US RMBS Using the MILAN Framework” published in July 2022 and available at https://ratings.moodys.com/api/rmc-documents/390484 and “Moody’s Approach to Rating Structured Finance Interest-Only (IO) Securities” published in February 2019 and available at https://ratings.moodys.com/api/rmc-documents/59126. Please see the Class List at the top of this announcement to identify the Interests Only Classes (indicated by the *). You can also visit the Scoring Methodologies page at https://ratings.moodys.com for a copy of these methodologies.

Factors that would lead to an upgrade or downgrade of ratings:

At the top

Higher levels of credit protection than needed to protect investors against current loss expectations could drive ratings higher. Losses could decline from Moody’s original expectations due to fewer debtor defaults or appreciation in the value of the mortgaged property securing a debtor’s promise to pay. Transaction performance is also highly dependent on the US macro economy and the housing market.

Down

Insufficient levels of credit protection to protect investors against current expectations of loss could lower ratings. Losses could exceed Moody’s original expectations due to a higher number of debtor defaults or deterioration in the value of mortgaged property securing a debtor’s promise to pay. Transaction performance is also highly dependent on the US macro economy and the housing market. Other reasons for below-expected performance include poor service, error on the part of the parties to the transaction, inadequate transaction governance, and fraud.

Finally, the performance of the RMBS remains highly dependent on the procedures of the services. Any changes resulting from the management of transfers or other changes in policy or regulation may affect the performance of these transactions. Additionally, improvements to reporting formats and data availability between transactions and fiduciaries can provide better insight into certain performance metrics such as the level of collateral changes.

REGULATORY INFORMATION

For details on key rating assumptions and Moody’s sensitivity analysis, see the Methodological Assumptions and Sensitivity to Assumptions sections in the Disclosure Form. Moody’s rating symbols and definitions can be found at https://ratings.moodys.com/rating-definitions.

The analysis relies on an assessment of the characteristics of the collateral to determine the distribution of collateral losses, ie the function correlated to an assumption about the probability of occurrence of each level of possible collateral losses. Secondly, Moody’s assesses each possible collateral loss scenario using a model that reproduces the relevant structural characteristics to deduce the payouts and therefore the ultimate potential losses for each rated instrument. The loss incurred by a rated instrument in each collateral loss scenario, weighted by assumptions about the likelihood of events in that scenario occurring, results in the expected loss of the rated instrument.

Moody’s quantitative analysis involves an evaluation of scenarios that focus on factors contributing to rating sensitivity and consider the likelihood of material collateral losses or impaired cash flows. Moody’s weights the impact on rated instruments based on its assumptions of the likelihood of events in such scenarios occurring.

For ratings issued on a program, series, category/class of debt or security, this announcement provides certain regulatory information regarding each rating of a subsequently issued bond or note of the same series, category/class of debt, security or under a program for which ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a media provider, this announcement provides certain regulatory information relating to the credit rating action on the media provider and each particular credit rating action for securities whose credit ratings are derived from the support provider’s credit rating. For the provisional ratings, this press release provides certain regulatory information relating to the provisional rating assigned, and to a final rating that may be assigned after the final issuance of the debt, in each case where the structure and conditions of the transaction n have not changed prior to the final rating being assigned in a way that would have affected the rating. For more information, please see the issuer/transaction page of the respective issuer at https://ratings.moodys.com.

For all relevant securities or rated entities receiving direct credit support from the lead entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action , the associated regulatory information will be that of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to the jurisdiction: Ancillary services, Disclosures to the rated entity, Disclosures to be provided by the rated entity.

The ratings have been communicated to the rated entity or its designated agent(s) and issued without modification resulting from such communication.

These ratings are solicited. Please refer to Moody’s Policy for the Designation and Assignment of Unsolicited Credit Ratings available on its website. https://ratings.moodys.com.

The regulatory information contained in this press release applies to the credit rating and, if applicable, the outlook or rating revision relating thereto.

Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis are available at https://ratings.moodys.com/documents/PBC_1288235.

The worldwide credit rating on this credit rating announcement was issued by one of Moody’s affiliates outside the EU and is approved by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main. -le-Main 60322, Germany, in accordance with Article 4(3) of Regulation (EC) No 1060/2009 on credit rating agencies. Further information on the EU approval status and the Moody’s office that issued the credit rating can be found at https://ratings.moodys.com.

The worldwide credit rating on this credit rating announcement has been issued by one of Moody’s affiliates outside the UK and is approved by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the United Kingdom. . Further information on the UK endorsement status and the Moody’s office that issued the credit rating can be found at https://ratings.moodys.com.

Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and Moody’s legal entity that issued the rating.

Please see the issuer/transaction page at https://ratings.moodys.com for additional regulatory information for each credit rating.

Jessica Wang
Associate Senior Analyst
Structured Finance Group
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
UNITED STATES
JOURNALISTS: 1 212 553 0376
Customer service: 1 212 553 1653

Sonny Weng
VP – Senior Loan Officer/Manager
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Customer service: 1 212 553 1653

Release Office:
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
UNITED STATES
JOURNALISTS: 1 212 553 0376
Customer service: 1 212 553 1653

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