Morningstar DBRS Assigns Provisional Credit Ratings to Freddie Mac STACR REMIC Trust 2025-DNA2

DBRS, Inc. (Morningstar DBRS) assigned the following provisional credit ratings to the Structured Agency Credit Risk (STACR) REMIC 2025-DNA2 Notes (the Notes) to be issued by Freddie Mac STACR REMIC Trust 2024-DNA2 (STACR 2025-DNA2):

-- $228.0 million Class A-1 at (P) A (low) (sf)
-- $228.0 million Class M-1 at (P) BBB (high) (sf)
-- $73.0 million Class M-2 at (P) BBB (sf)
-- $36.5 million Class M-2A at (P) BBB (sf)
-- $36.5 million Class M-2B at (P) BBB (sf)
-- $73.0 million Class M-2R at (P) BBB (sf)
-- $73.0 million Class M-2S at (P) BBB (sf)
-- $73.0 million Class M-2T at (P) BBB (sf)
-- $73.0 million Class M-2U at (P) BBB (sf)
-- $73.0 million Class M-2I at (P) BBB (sf)
-- $36.5 million Class M-2AR at (P) BBB (sf)
-- $36.5 million Class M-2AS at (P) BBB (sf)
-- $36.5 million Class M-2AT at (P) BBB (sf)
-- $36.5 million Class M-2AU at (P) BBB (sf)
-- $36.5 million Class M-2AI at (P) BBB (sf)
-- $36.5 million Class M-2BR at (P) BBB (sf)
-- $36.5 million Class M-2BS at (P) BBB (sf)
-- $36.5 million Class M-2BT at (P) BBB (sf)
-- $36.5 million Class M-2BU at (P) BBB (sf)
-- $36.5 million Class M-2BI at (P) BBB (sf)
-- $36.5 million Class M-2RB at (P) BBB (sf)
-- $36.5 million Class M-2SB at (P) BBB (sf)
-- $36.5 million Class M-2TB at (P) BBB (sf)
-- $36.5 million Class M-2UB at (P) BBB (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 are Modifiable and Combinable STACR Notes (MAC Notes). Classes M-2I, M-2AI, and M-2BI are interest-only MAC Notes.

The (P) A (low), (P) BBB (high) (sf) and (P) BBB (sf) ratings on the Notes reflect 3.75%, 2.50%, and 2.10% of credit enhancement, respectively.

Other than the specified classes above, Morningstar DBRS does not rate any other classes in this transaction.

DBRS, Inc. (Morningstar DBRS) assigned provisional credit ratings to the Structured Agency Credit Risk (STACR) REMIC 2025-DNA2 Notes (the Notes) to be issued by Freddie Mac STACR REMIC Trust 2025-DNA2 (STACR 2025-DNA2 or the Issuer).

The Notes are subject to the credit and principal payment risk of a certain reference pool (the Reference Pool) of residential mortgage loans held in various Federal Home Loan Mortgage Corporation (Freddie Mac or the Company)-guaranteed mortgage-backed securities (MBS).

As of the Cut-Off Date, the Reference Pool consists of 56,088 greater-than-20-year fully amortizing first-lien fixed-rate mortgage loans underwritten to a full documentation standard, with original loan-to-value (LTV) ratios greater than 60% and less than or equal to 80%. The mortgage loans were estimated to be originated on or after May 1, 2023, and were securitized by Freddie Mac between May 1, 2024, and June 30, 2024.

On the Closing Date, the Trust will enter into a Collateral Administration Agreement (CAA) with Freddie Mac. Freddie Mac, as the credit protection buyer, will be required to make transfer amount 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 return amounts, if any, to Freddie Mac upon the occurrence of certain specified credit events and modification events.

This transaction includes a rated senior Class A-1 Note. The Class A-1 Note is subordinate to the Class A-H reference tranche. If the Class A-1 Cumulative Net Loss Test is met, the Class A-1 Note will receive principal payment based on a predetermined schedule for the first 36 months, after which 100% of the senior reduction amount will be used to pay down the Class A-1 Note. In period 39, if the Class A-1 Note is outstanding and Class A-1 Cumulative Net Loss Test is met, the Class A-1 Note will be paid in full. If the Class A-1 Cumulative Net Loss Test is not met, the Class A-1 Note will be locked out from receiving principal payments, except its share of supplemental reduction amount.

The coupon rates for the Notes are based on the Secured Overnight Financing Rate (SOFR). There are replacement provisions in place in the event that SOFR is no longer available; please see the Private Placement Memorandum (PPM) for more details. Morningstar DBRS did not run interest rate stresses for this transaction, as the interest is not linked to the performance of the reference obligations. Instead, the trust will use the net investment earnings on the eligible investments together with Freddie Mac's transfer amount payments to pay interest to the Noteholders.

In this transaction, approximately 22.5% of the loans were originated using property values determined by using Freddie Mac's automated collateral evaluation (ACE) assessment with Property Data Report rather than a traditional full appraisal. Loans where the property values were determined by using ACE assessments generally have better credit scores and lower original LTV. Please see the PPM for more details about the ACE assessment.

The calculation of principal payments to the Notes will be based on actual principal collected on the Reference Pool. For STACR DNA transactions issued after and including STACR 2018-DNA2, the scheduled and unscheduled principal will be combined and allocated pro rata between the senior and nonsenior tranches only if certain performance tests are satisfied. For transactions previous to this, the scheduled principal was allocated pro rata between the senior and nonsenior (mezzanine and subordinate) tranches, regardless of deal performance, while the unscheduled principal was allocated pro rata subject to certain performance tests being met.

The minimum credit enhancement test¿one of the three performance tests¿for STACR 2025-DNA2 is set to pass at the Closing Date. Additionally, the Class A-1 and nonsenior tranches are also entitled to supplemental subordinate reduction amount if the offered reference tranche percentage increases above 5.50%.

The Notes are scheduled to mature on the payment date in May 2045, but are also subject to a mandatory redemption prior to the scheduled maturity date in the case of a termination of the CAA.

Freddie Mac is the Sponsor, Aggregator, and Master Servicer of the transaction. Morningstar DBRS performed an operational risk review of Freddie Mac and believes the Company has robust seller and servicer approval and oversight processes and deems it to be an acceptable mortgage loan aggregator and master servicer for Morningstar DBRS-rated transactions. Citibank, N.A. (rated AA (low) with a Stable trend and R-1 (middle) with a Stable trend by Morningstar DBRS) will act as the Indenture Trustee and Exchange Administrator. The Bank of New York Mellon (rated AA (high) with a Stable trend and R-1 (high) with a Stable trend by Morningstar DBRS) will act as the Custodian. Wilmington Trust National Association (rated A (high) with a Stable trend and R-1 (middle) with a Stable trend by Morningstar DBRS) will act as the Owner Trustee.

The Reference Pool consists of approximately 4.7% of loans originated under the Home Possible® program. Home Possible® is Freddie Mac's affordable mortgage product designed to expand the availability of mortgage financing to creditworthy low- to moderate-income borrowers. In addition, only one loan was originated under Freddie Mac Refi PossibleSM, which offers low- to moderate- income borrowers options to refinance their current loans, and approximately 0.52% of loans were originated under Freddie Mac HFA Advantage®, a conventional mortgage product designed for borrowers who qualify for HFA homeownership programs.

If a reference obligation is refinanced under the Enhanced Relief Refinance Program, then the resulting refinanced reference obligation may be included in the Reference Pool as a replacement of the original reference obligation. The Enhanced Relief Refinance Program provides refinance opportunities to borrowers with existing Freddie Mac mortgages who are current in their mortgage payments but whose LTVs exceed the maximum permitted for standard refinance products. The refinancing and replacement of a reference obligation under this program will not constitute a credit event.

For this transaction, if a related mortgaged property is located in an area affected by a hurricane, the associated loan becomes delinquent, and the related Servicer reports that such loan is in disaster forbearance before the sixth reporting period from the landfall of the hurricane, Freddie Mac will remove the loan from the pool to the extent that the related mortgaged property is located in a Federal Emergency Management Agency (FEMA) major disaster area and in which FEMA had authorized individual assistance to homeowners in such area as a result of such hurricane that affects such related mortgaged property prior to the Closing Date.

The credit ratings reflect transactional strengths that include the following:
-- Seller (or Lender)/Servicer approval process and quality control platform.
-- Well diversified reference pool.
-- High-quality credit and loan attributes.
-- Strong alignment of interest.
-- Extensive performance history.

The transaction also included the following challenges:
-- Representations and Warranties (R&W) framework.
-- Limited third-party due diligence.
-- Counterparty exposure.

Morningstar DBRS' credit rating on the Notes addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the related Interest Payment Amount and the related Class Principal Balance (for non-IO Notes).

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS

There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024) https://dbrs.morningstar.com/research/437781.

Notes:
All figures are in US dollars unless otherwise noted.

The principal methodology applicable to the credit ratings is

RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology (January 02, 2025) https://dbrs.morningstar.com/research/445477.

Other methodologies referenced in this transaction are listed at the end of this press release.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

A provisional credit rating is not a final credit rating with respect to the above-mentioned securities and may change or be different than the final credit rating assigned or may be discontinued. The assignment of the final credit ratings on the above-mentioned securities are subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalize the credit ratings.

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

DBRS, Inc.
140 Broadway, 43rd Floor
New York, NY 10005 USA
Tel. +1 212 806-3277

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model (Version 1.3.29.0)
https://dbrs.morningstar.com/research/445477

-- Interest Rate Stresses for U.S. Structured Finance Transactions (March 27, 2024),
https://dbrs.morningstar.com/research/450750
-- Third-Party Due-Diligence and Representations & Warranties Criteria for U.S. RMBS Transactions (September 30, 2024), https://dbrs.morningstar.com/research/440091
-- Legal Criteria for U.S. Structured Finance (December 3, 2024),
https://dbrs.morningstar.com/research/444064
-- Operational Risk Assessment for U.S. RMBS Originators and Servicers (September 30, 2024), https://dbrs.morningstar.com/research/440086

For more information on this credit or on this industry, visit dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.