National Mortgage Insurance Corp. agreed to insure $5 billion in residential mortgages in its first risk-transfer transaction with Fannie Mae.

The transaction is expected to take effect in the third quarter.

The deal is contingent on the District of Columbia Department of Insurance, Securities and Banking's review and approval of National MI's insurance policy.

The transaction was offered through a formal bidding process to private mortgage insurers, keeping in line with the Federal Housing Finance Agency’s 2013 strategic goal of bringing more private capital back into the market.

Fannie Mae selected National MI as the insurer based on its favorable terms and conditions, as well as the beneficial risk share attributes tied to the transaction.

National MI began writing business in April of this year and was approved as a qualified mortgage insurer in January by Fannie Mae and Freddie Mac.  

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