Investments

Freddie Mac doubles down on credit risk offload to insurers

Backstops remaining credit risk from three STACR deals

Freddie Mac has made its first move of the year as part of its continuing effort to limit the American taxpayer's liability. Freddie announced that has obtained a number of insurance polices designed to cover much of the remaining credit risk associated with three of its Structured Agency Credit Risk transactions from 2014.

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

These three transactions transfer much of the remaining credit risk associated with three STACR deals executed in 2014, up to a combined maximum limit of approximately $707 million of losses on pools of single-family loans acquired in 2013 and the first quarter of 2014, Freddie said in a release.

The three STACR deals are STACR 2014-DN1, which featured $32.44 billon in unpaid principal balance; STACR 2014-DN2, which featured a $28.1 billion reference pool of 116,677 mortgages; and STACR 2013-DN2, which boasted a reference pool of more than 145,500 mortgages with an outstanding principal balance of $35.3 billion.

"The three ACIS executions right out of the gate this year reinforces our commitment to programmatic and efficient transactions," said Kevin Palmer, vice president of Freddie Mac's single-family strategic credit costing and structuring.

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

"Combined with our ACIS transaction in December, we have now acquired more than $860 million in additional insurance coverage since our last STACR transactions in October 2014,” Palmer added.

“Similar to previous deals, this transaction also includes new participants as we continue to mature and further expand our panel of counterparties."

Through STACR and ACIS, Freddie said that it has laid off a substantial portion of credit risk on more than $205 billion of unpaid principal balance in single-family mortgages since the programs’ first offerings in mid-2013.

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