Freddie Mac has signed a risk sharing
agreement with Arch Reinsurance Ltd. Which will cover up to $77.4 million in
possible credit losses from a pool of single family loans. The agreement is similar to one announced
last month between Fannie Mae and National Mortgage Insurance Corporation to
cover $5.0 billion in risk.
This new insurance coverage is another
initiative by Freddie Mac to meet a strategic goal set for it and Fannie Mae
(the GSEs) to transfer at least $30 billion of its single-family mortgage risk
to private sources of capital. The
Freddie Mac/Arch contract involves a portion of the credit risk of loans funded
in the third quarter of 2012.
"This is part of our business strategy to expand risk-sharing with
private firms, thus reducing taxpayers' exposure to losses from mortgage
foreclosures," said David Lowman, executive vice president of
single-family business for Freddie Mac. "We have brought to the market new
sources of capital for transferring mortgage credit risk away from taxpayers.
We've tapped into the global insurance community's appetite for U.S. mortgage
credit exposure, and would like to do more of these policies in the
Freddie Mac has sought to further meet the strategic goals, set for the GSEs
by the Federal Housing Finance Agency (FHFA) with two STACR debt offerings, the
first of which closed in July and the second of which was priced last week.