DBRS Assigns Provisional Ratings to Freddie Mac STACR Trust 2019-DNA1

DBRS, Inc. (DBRS) assigned the following provisional ratings to the Structured Agency Credit Risk (STACR) 2019-DNA1 Notes (the Notes) issued by Freddie Mac STACR Trust 2019-DNA1:

-- $215.0 million Class M-1 at BBB (sf)
-- $327.0 million Class M-2 at B (high) (sf)
-- $327.0 million Class M-2R at B (high) (sf)
-- $327.0 million Class M-2S at B (high) (sf)
-- $327.0 million Class M-2T at B (high) (sf)
-- $327.0 million Class M-2U at B (high) (sf)
-- $327.0 million Class M-2I at B (high) (sf)
-- $163.5 million Class M-2A at BB (high) (sf)
-- $163.5 million Class M-2AR at BB (high) (sf)
-- $163.5 million Class M-2AS at BB (high) (sf)
-- $163.5 million Class M-2AT at BB (high) (sf)
-- $163.5 million Class M-2AU at BB (high) (sf)
-- $163.5 million Class M-2AI at BB (high) (sf)
-- $163.5 million Class M-2B at B (high) (sf)
-- $163.5 million Class M-2BR at B (high) (sf)
-- $163.5 million Class M-2BS at B (high) (sf)
-- $163.5 million Class M-2BT at B (high) (sf)
-- $163.5 million Class M-2BU at B (high) (sf)
-- $163.5 million Class M-2BI at B (high) (sf)
-- $163.5 million Class M-2RB at B (high) (sf)
-- $163.5 million Class M-2SB at B (high) (sf)
-- $163.5 million Class M-2TB at B (high) (sf)
-- $163.5 million Class M-2UB at B (high) (sf)
-- $86.0 million Class B-1 at B (low) (sf)
-- $43.0 million Class B-1A at B (sf)
-- $43.0 million Class B-1AR at B (sf)
-- $43.0 million Class B-1AI at B (sf)
-- $43.0 million Class B-1B at B (low) (sf)

Classes M-2, M-2R, M-2S, M-2T, M-2U, M-2I, M-2AR, M-2AS, M-2AT, M-2AU, M-2AI, M-2BR, M-2BS, M-2BT, M-2BU, M-2BI, M-2RB, M-2SB, M-2TB, M-2UB, B-1AR, B-1AI and B-1 are Modifiable and Combinable STACR Notes (MAC Notes). Classes M-2I, M-2AI, M-2BI and B-1AI are interest-only MAC Notes.

The BBB (sf), BB (high) (sf), B (high) (sf), B (sf) and B (low) (sf) ratings reflect 3.000%, 2.050%, 1.100%, 0.850% and 0.600% of credit enhancement, respectively. Other than the specified classes above, DBRS does not rate any other classes in this transaction.

STACR 2019-DNA1 is the 14th transaction in the STACR DNA series. The Notes are subject to the credit and principal payment risk of a certain reference pool of residential mortgage loans held in various Freddie Mac-guaranteed mortgage-backed securities.

As of the Cut-off Date, the Reference Pool consists of 106,427 greater-than-20-year fully amortizing first lien fixed-rate mortgage loans underwritten to a full documentation standard, with original loan-to-value ratios greater than 60% and less than or equal to 80%. The mortgage loans were originated on or after October 2017 and were acquired by Freddie Mac between April 1, 2018, and June 30, 2018.

On the Closing Date, the trust will enter into a credit protection agreement (CPA) with Freddie Mac. Freddie Mac, as the credit protection buyer, will be required to make credit premium payments. The trust is expected to use the aggregate proceeds realized from the sale of the notes to purchase certain eligible investments to be held in a custodian account. The eligible investments are restricted to highly rated, short-term investments. Cash flow from the reference pool will not be used to make any payments; instead, a portion of the eligible investments held in the custodian account will be liquidated to make principal payments to the Noteholders and credit protection payments, if any, to Freddie Mac upon the occurrence of certain specified credit events and modification events. The trust will use the net investment earnings on the eligible investments together with Freddie Mac’s credit premium payments to pay interest to the Noteholders.

The calculation of principal payments to the Notes will be based on actual principal collected on the reference pool. The interest payments for these transactions are not linked to the performance of the reference obligations except to the extent that modification losses have occurred. The Notes will be scheduled to mature on the payment date in January 2049 but will be subject to mandatory redemption prior to the scheduled maturity date upon the termination of the CPA.

DBRS notes the following strengths and challenges for this transaction:

STRENGTHS
-- Seller (or lender)/servicer approval process and quality control platform,
-- Well-diversified reference pool,
-- Strong alignment of interest and
-- Extensive performance history.

CHALLENGES
-- Representation and warranties framework,
-- Limited third-party due diligence and
-- Counterparty Exposure.

The full description of the strengths, challenges and mitigating factors are detailed in the related report.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology, which can be found on dbrs.com under Methodologies & Criteria.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrs.com.

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