Freddie Mac said last week that it has taken out insurance policies to cover up to approximately $270 million of losses for part of the credit risk associated with single-family loans, thereby reducing taxpayer exposure to mortgage losses.
Underwritten by a group of “well-capitalized and established insurers and reinsurers,” the policies were obtained through Freddie Mac’s agency credit insurance structure (ACIS).
“We have a good start on our goal to provide multiple avenues for sharing mortgage credit risk with a diverse spectrum of private investors,” Kevin Palmer, the vice president of single-family strategic credit costing and structuring for Freddie Mac, said. “Global reinsurers represent a large source of capital, and they are interested in expanding their product line to cover Single-Family mortgages. This year, we expect to execute multiple insurance transactions and bring in additional insurance and reinsurance companies.”
Earlier this month Freddie Mac joined Aon Benfield as a co-host of a reinsurer industry day, which drew representatives from 13 foreign and U.S.-based reinsurance firms.
“Transferring some of our Single-Family risk to large, diversified global insurance and reinsurance companies help us to better manage our risk,” Palmer said.
The mortgage giant has introduced several new risk-sharing initiatives, including four STACR debt note offerings and two ACIS transactions related to three policies. The first ACIS took place in November and covered up to $77 million in losses. Freddie Mac said its STACR and ACIS initiatives have reduced risk on more than $95 billion in single-family loans.