Fannie shifts risk to private mortgage insurer

by Ryan Smith11 Oct 2013

Fannie Mae has finalized an agreement with a private mortgage insurer to provide coverage on billions of dollars in mortgages.

National Mortgage Insurance Corporation (National MI) has agreed to provide credit risk coverage on $5bn in single-family mortgages, according to a Thursday news release from Fannie Mae. The agreement furthers a goal set by Fannie’s conservator, the Federal Housing Finance Agency, to transfer risk to private capital. Fannie’s 2013 Conservatorship Scorecard calls for the company to transfer at least $30bn in risk to private capital.

“This insurance policy transfers credit risk away from taxpayers, which is an important element of creating a more sustainable housing finance system,” said Andrew Bon Salle, executive vice president for underwriting, pricing and capital markets at Fannie Mae.  “We will continue working with FHFA to meet the goals of the Conservatorship Scorecard for 2013 to reduce risk for Fannie Mae and taxpayers.”

National MI, a mortgage insurer established in 2012, insures mortgage loans for about 150,000 households nationwide, according to its website. National MI will cover loans Fannie acquired in the fourth quarter of 2012 with loan-to-value ratios between 70 and 80%. The National MI coverage reduces Fannie’s risk on the loans to about 50% LTV.

Further agreements with private companies are expected this year to meet Fannie’s $30bn goal, according to the news release.

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