Freddie Mac breaks record with largest credit risk deal with insurers

Would cover maximum limit of approximately $702.4 million in losses

Freddie Mac announced late Friday that it obtained its largest insurance policy to date designed to cover much of the remaining credit risk associated with one of its Structured Agency Credit Risk transactions from earlier this year.

Freddie Mac obtained the insurance policy under its Agency Credit Insurance Structure, which is intended to attract private capital from non-mortgage guaranty insurers and reinsurers.

The new ACIS policy transfers much of the remaining credit risk associated with Freddie Mac’s fourth actual loss STACR offering, October’s STACR Series 2015-DNA3, to insurance and reinsurance companies around the globe.

According to Freddie Mac, this policy transfers up to a combined maximum limit of approximately $702.4 million of losses on a pool of single-family loans acquired from December 2014 to March 2015.

With this transaction Freddie Mac has acquired approximately $2.2 billion in insurance coverage this year with eight ACIS transactions and nearly $3.1 billion since the program's inception, Freddie Mac said.

STACR Series 2015-DNA3 has a reference pool of single-family mortgages acquired from December 2014 through March 2015 with an unpaid principal balance of more than $34.7 billion.

Under the terms of the transaction, Freddie Mac holds the senior loss risk in the reference pool, and a portion of the risk in the Class M-1, M-2, M-3, and the first loss Class B tranche.

"This transaction marks several key milestones in the ACIS program such as $3 billion in risk transferred, continuously growing panel of participants and the first time that ACIS and STACR were issued in the same month,” said Kevin Palmer, senior vice president of Credit Risk Transfer for Freddie Mac.

“These accomplishments highlight the maturity of the program and strong interest by repeat and new reinsurers,” Palmer added.

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