Freddie Mac backstops more loans with massive insurance policies

Would cover approximately $508 million in losses

Freddie Mac announced Tuesday that it obtained two more insurance policies designed to cover much of the remaining credit risk associated with two of its Structured Agency Credit Risk transactions from earlier this year.

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

The new ACIS policies transfer much of the remaining credit risk associated with Freddie Mac’s STACR HQ series deals, which feature the actual loss position on loans with loan-to-value ratios ranging from 80% to 95%.

The insurance policies transfer up to a combined maximum limit of approximately $508 million of losses on STACR 2015-HQA2 and STACR 2015-HQA1.

In previous announcements, Freddie Mac said that the $590 million STACR 2015-HQA2 has a reference pool of single-family mortgages with an unpaid principal balance of more than $17 billion.

The reference pool consists of a subset of 30-year fixed-rate single-family mortgages acquired by Freddie Mac between Dec. 1, 2014, and March 31, 2015, with LTVs from 80 to 95%, Freddie Mac said.

While STACR 2015-HQA1 was Freddie Mac’s first actual loss high-LTV risk-sharing deal. The $872 million offering was Freddie Mac’s third transaction where losses were to be allocated based on the actual losses realized on the related reference obligations instead of allocating losses using a fixed severity approach, and the first where the actual loss was offered on loans with high LTVs.

"With these two new transactions, we're closing out a very strong year for the ACIS program. Freddie Mac continues to break new ground in these initiatives which demonstrates our company's commitment and innovation in transferring credit risk away from taxpayers," said Kevin Palmer, senior vice president of Single-Family credit risk transfer for Freddie Mac.

With these transactions Freddie Mac has acquired approximately $2.8 billion in insurance coverage this year with ten ACIS transactions and over $3.5 billion since the program's inception in 2013.

The 4th quarter of 2015 marks the largest issuance period in the history of the program, with over $1.7 billion in transactions executed, Freddie Mac said.

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