Fannie Mae checked off another box on
the Federal Housing Finance Agencies 2013 Conservatorship Scorecard by recently
signing an agreement for credit risk coverage for over $5 billion of its single
family mortgages. The agreement with
National Mortgage Insurance Corporation (National MI) provides credit risk
coverage for certain loans acquired by the company in the fourth quarter of
2012 with original loan to value (LTV) ratios between 70 and 80 percent.
The terms of the policy, which became
effective on September 1, will lower Fannie Mae's exposure on the loans to
approximately 50 percent LTV subject to a deductible and aggregate loss limits
and will further the score card goals of transferring at least $30 billion of
its single-family mortgage risk to private sources of capital.
Emeryville, California based NMI
is a newcomer in the private mortgage insurance world. The company, which is heavily staffed by
former employees of now-bankrupt PMI group, once the second largest private
mortgage insurer, was started in 2012 with a $550 million investment from hedge
funds and mutual funds. SF Gate has identified Kyle Bass,
founder of Hayman Capital as one major investor saying he was principally known
for betting against subprime mortgages.
National MI has declined to identify any investors other than Bass.
The new company came out of the gate
fast. In January of this year they
became only the second private mortgage insurance company since the mortgage
meltdown to get approval to insure Freddie Mac and Fannie Mae loans. Borrowers are typically required to obtain a
private mortgage insurance policy for the benefit of the lender when a loan's
LTV is less than 80 percent. On its website the company says it "brings the
capacity to insure $30 billion in new business and the financial strength that
comes from having no legacy risk."
Andrew Bon Salle, executive vice
president for underwriting, pricing, and capital markets at Fannie Mae said of
the agreement, "This insurance policy transfers credit risk away from
taxpayers, which is an important element of creating a more sustainable housing
finance system. We will continue working
with FHFA to meet the goals of the Conservatorship Scorecard for 2013 to reduce
risk for Fannie Mae and taxpayers."
Fannie Mae says it expects to make additional transactions this year to meet
its Scorecard goals.