Freddie Mac Test
HFS loans - answer loans that move onto securitization (K /SB /ML-Deal), they are
prone to interest rate (market) in the conduit or floating period; these loans have merits
that perform well, as their credit risk is low
HFI loans - answer loans intended for PC/KP-Deals or retained as Whole Loans on the
retained portfolio balance sheet. Loans that do not move onto securitization
non cash assets – answer TEBS (M-Deals) Bonds CE, Q-Deals, PC Swaps
LTV (Loan to Value) - answer financial term used by lenders to express the ratio of a
loan to the value of an asset (property) purchased.
- Determined by using the Purchase Price or the Appraised Value, whichever is LESS.
(should be under 1)
DSCR - answer Debt Service Coverage Ratio
Measurement of a property's ability to generate enough revenue to cover the cost of its
mortgage payments. It is calculated by dividing the net operating income by the total
debt service. (NOI / loan payments) should be above 1
CRCA calculation - answer(Base Credit Risk Capital) x (Combined Credit Risk
Multipliers) x (UPB)
UPB - answerthe portion of a loan (e.g. a mortgage loan) at a certain point in time that
has not yet been remitted to the lender.
IRCA - answer(15 bps x spread duration)
the economic risk associated with adverse changes in interest rates, volatility, and
spreads
OPCA - answerThe risk of direct or indirect loss from inadequate or failed internal
processes, people, systems, or from external events. 8 bps x UPB (or market value)
Going-Concern Buffer (GCB) - answerCCF requires all GSEs to hold additional capital
on and on-going basis in order to continue purchasing exposures and to maintain
market confidence during and after a period of severe distress.
Break-Even Spread - answerspread on the loan you'd have to charge in order to cover
your securitization costs for every loan settled and purchased
Loan Pool Preparation (2-4 weeks) - answeridentify pool collateral, subordinate investor
RFP, engage subordinate bond investor, engage rating agencies
HFS loans - answer loans that move onto securitization (K /SB /ML-Deal), they are
prone to interest rate (market) in the conduit or floating period; these loans have merits
that perform well, as their credit risk is low
HFI loans - answer loans intended for PC/KP-Deals or retained as Whole Loans on the
retained portfolio balance sheet. Loans that do not move onto securitization
non cash assets – answer TEBS (M-Deals) Bonds CE, Q-Deals, PC Swaps
LTV (Loan to Value) - answer financial term used by lenders to express the ratio of a
loan to the value of an asset (property) purchased.
- Determined by using the Purchase Price or the Appraised Value, whichever is LESS.
(should be under 1)
DSCR - answer Debt Service Coverage Ratio
Measurement of a property's ability to generate enough revenue to cover the cost of its
mortgage payments. It is calculated by dividing the net operating income by the total
debt service. (NOI / loan payments) should be above 1
CRCA calculation - answer(Base Credit Risk Capital) x (Combined Credit Risk
Multipliers) x (UPB)
UPB - answerthe portion of a loan (e.g. a mortgage loan) at a certain point in time that
has not yet been remitted to the lender.
IRCA - answer(15 bps x spread duration)
the economic risk associated with adverse changes in interest rates, volatility, and
spreads
OPCA - answerThe risk of direct or indirect loss from inadequate or failed internal
processes, people, systems, or from external events. 8 bps x UPB (or market value)
Going-Concern Buffer (GCB) - answerCCF requires all GSEs to hold additional capital
on and on-going basis in order to continue purchasing exposures and to maintain
market confidence during and after a period of severe distress.
Break-Even Spread - answerspread on the loan you'd have to charge in order to cover
your securitization costs for every loan settled and purchased
Loan Pool Preparation (2-4 weeks) - answeridentify pool collateral, subordinate investor
RFP, engage subordinate bond investor, engage rating agencies
