Investments

Freddie Mac offloads $155 million of credit risk to insurers

Fourth ACIS transaction brings total credit risk offload to $205 billion

As part of its continuing effort to limit the American taxpayers’ liability, Freddie Mac  obtained a number of insurance polices designed to cover almost $155 million in potential losses from a pool of single-family loans acquired in the third 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 transaction is backed by a mix of new and returning participants," said Kevin Palmer, vice president of Freddie Mac's Single-Family strategic credit costing and structuring. "These policies further demonstrate Freddie Mac's business strategy to expand risk sharing with private firms to reduce taxpayers' exposure to mortgage losses."

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

Between the four ACIS transactions and the nine STACR offerings, Freddie has as laid off a substantial portion of credit risk on more than $205 billion of unpaid principal balance to investors and insurers.

“ACIS demonstrates an alternative to risk transfer outside of the capital markets that we believe will be a meaningful part of our future risk transfer strategy,” Palmer added.

“ACIS transfers a portion of the remaining credit risk associated with STACR reference pools to a diversified set of insurance and reinsurance companies around the globe, some of which are among the largest and best-capitalized in the industry."

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