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Freddie Mac offloads $285 million more in credit risk to insurers

Largest credit risk transfer of its kind

As part of its continuing effort to limit the American taxpayers’ liability, Freddie Mac has obtained a number of insurance polices designed to cover almost $285 million in potential losses from a pool of single-family loans acquired in the second quarter of 2013.

The policies were obtained under the Agency Credit Insurance Structure, which is intended to attract private capital from non-mortgage guaranty insurers and reinsurers.

This is Freddie’s third and largest transaction of this kind to date.

“With this third reinsurance transaction, we are bringing in new reinsurance and insurance companies, and distributing risk across more market participants," said Kevin Palmer, vice president of single-family strategic credit costing and structuring for Freddie Mac.

The ACIS deals are just one way that Freddie is attempting to limit its potential for loss. It also has issued four Structured Agency Credit Risk securitizations, which are designed to attract private capital back into the market.

Between the four STACR deals and the three ACIS deals, Freddie has offloaded risk on more than $100 billion in single-family mortgages.

This pool of mortgages, called ACIS 2014-2, is conventional fully amortizing 30-year fixed rate first lien mortgages with original loan-to-value ratios between 60%-80%.

According to Freddie, one domestic primary insurance company, one international primary insurance company and two international reinsurers underwrote the insurance policies.

“(This transaction) further demonstrates the company's business strategy to expand risk sharing with private firms to reduce taxpayers' exposure to mortgage losses,” Freddie said in a statement.

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