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Focus on: Callable REMICs (CPC)
Freddie Mac Callable REMIC securities are structured multiclass securities (issued in any type of REMIC structure) with the added feature that they are subject to a third-party call option. Callable REMICs are created in one of two forms, each involving use of Freddie Mac Callable Pass-Through Certificates (CPC). More than $17.5 billion in CPCs were issued in 2002. Introduced in 1995, Freddie Mac’s CPCs are issued as related pairs of “Callable” and “Call” classes. The callable class will receive all of the principal and interest (P&I) cash flow from an underlying pool of collateral, typically consisting of Gold PCs formed into a Giant PC. Gold PCs, Giants, existing REMIC structures and GNMA pools are all examples of eligible collateral for CPCs. The call class holder receives none of the cash flow, but rather, has the right to direct Freddie Mac to redeem the callable class by giving appropriate notice and by paying Freddie Mac the funds it uses to actually redeem the callable class. In exchange, the call class holder receives the underlying collateral.

Structures
By integrating the CPC structure into the REMIC securities, Freddie Mac is able to issue Callable REMICs. Callable REMICs are created either by a) using a CPC callable class as collateral for a REMIC issuance, or b) using a REMIC class as collateral for a CPC issuance.

Structure #1: REMIC backed by CPCs
The first callable REMIC structure consists of the issuance of REMIC regular classes backed by a CPC callable class. The principal and interest cash flow on the callable class will be passed through to the REMIC class investors. When the call is exercised, the callable class and the REMIC regular classes will be redeemed, and the call class investor will receive the underlying collateral.

Callable Passthrough Certificate (CPC)

REMIC

Underlying Collateral P&I Gold PCs, etc. A1 Callable Class P&I

A B C
Call Option B1 Call Class

R

beginning on a specified payment date. beginning on a specified payment date. the B1 call class investor will receive the underlying collateral. at the stated redemption price. each holder of a callable class will receive the outstanding principal amount of that holder’s security plus 30 days’ interest at its applicable class coupon on such principal amount. For CPCs backed by Gold PC securities. . the call class holder can exercise the call only after expiration of a lock-out period. but will have the right to direct Freddie Mac to redeem. the outstanding principal amount of the A1 callable class (at the CPC level) and concurrently. at the stated redemption price as specified in the Offering Circular. which is generally one year after issuance. all of the regular classes at the REMIC level. Structure #2: CPC Callable and Call Classes Backed by REMIC Classes The second callable REMIC structure consists of one or more pairs of CPC callable and call classes that are backed by a REMIC regular class. the outstanding principal amount of the A1 callable class. as specified in the Offering Circular.The holder of the B1 call class will not receive payments of principal and interest. Once the redemption is complete. The redemption price will normally equal 100% of the A1 callable class’ unpaid principal amount. Upon a redemption of the REMIC class (or callable class backed by REMIC class). When a call is exercised. The holder of the B1 call class will not receive payments of principal and interest. factors will be disclosed for the callable classes on or about the fifth business day of each month. Giants. factors will be disclosed for the callable classes on or about the ninth business day of the month. the call cannot be exercised unless the market price of the collateral that the call class holder will receive is par or above at the time the call is exercised. REMIC P&I CPC A1 Callable Class A B Call Option C R B1 Call Class Factor Availability Factor availability is dependent on the underlying collateral of the Callable Passthrough Security. but will have the right to direct Freddie Mac to redeem. For CPCs backed by GNMA collateral. Exercising the Call Option Freddie Mac must be notified by at least the preceding calendar month (or up to three to five days prior to the record date occurring that month) of the call holder’s intent to call the callable class. First. or Gold REMICs. Once the redemption is complete. The call class holder’s right to exercise the call will be subject to several conditions. The redemption price will equal normally 100% of the A1 callable class’ unpaid principal amount. plus interest to the date of redemption. the callable class is redeemed and the call class investor receives the underlying REMIC regular class. Also. the B1 call class investor will then receive the A regular REMIC class. plus interest to the date of redemption. Each callable class is entitled to receive the cash flow from a distinct REMIC regular class until the related call is exercised.

however. for CPCs that use GNMA pools as collateral..Tax Issues For a discussion on tax issues. . PC prefixes are also available. Eastern Standard Time. collateral availability. Investor_Inquiry@FreddieMac. see Freddie Mac’s “Focus on Tax Considerations of Callable REMIC Classes” in the Offering Circular. A variety of resources are available to provide investors with the most comprehensive information about their gold PC securities. callable REMIC supply. Product information.com/mbs: A convenient and easy-to-use single source of information for the mortgage securities community. to 5:00 p.m. Customer Support: Freddie Mac takes pride in providing timely customer support. estimated REMIC production. the payment date may vary per transaction.com: Knowledgeable securities information specialists are available from 9:00 a. Record/Payment Date Freddie Mac will pay principal and interest for callable REMIC classes that use Gold PCs as collateral for the CPCs on the 15th of each month. Investor Inquiry (800) 336-3672.m. announcements regarding Freddie Mac’s passthrough and REMIC products. and will:  J  J Answer questions about Freddie Mac Gold PC securities and structured products Explain how to access factors and coupons for existing mortgage securities as well www. to the holder of record as of the close of business on the last day of the month prior to payment. View recently priced REMICs. structured product fees. and other mortgage securities issuance reports. including: • Details about our products • Product-specific CUSIP lookup • Mortgage securities data and subscription services • Legal documentation and tax information for mortgage securities FMAC <GO>: A wide range of information and data is available on Freddie Mac’s Bloomberg site. Generally. Freddie Mac’s mortgage securities website provides quality information about Freddie Mac securities. reference pools. Freddie Mac will pay principal and interest on the second business day after the 15th calendar day of each month to the holder of record as of the close of business on the last day of the month prior to payment.FreddieMac.

Morgan Chase & Co. Greenwich Capital Markets. Inc. Inc. J. www.com/mbs This fact sheet is not an offer to sell any Freddie Mac securities. Morgan Stanley Nomura Securities Salomon Smith Barney UBS Warburg LLC For additional information about Freddie Mac’s Callable REMICs. contact a Transaction Manager at (866) 903-2767.freddiemac.P. which incorporate Freddie Mac’s information statement and related supplements. CS First Boston Corporation Countrywide Securities First Tennessee National Corporation Freddie Mac SS&TG Goldman Sachs & Co. Publication FS029 Updated August 2003 . Offers for any given security are made only through applicable offering circulars and related supplements. Inc.To execute a Callable REMIC: Contact a Freddie Mac Transaction Manager at (866) 903-2767 or one of our REMIC dealers: Banc of America LLC Bear Stearns & Co.. Morgan Keegan & Co. Lehman Brothers Merrill Lynch & Co.

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