Will Freddie Mac’s new risk-sharing deals increase credit access?

by MPA13 Jan 2015

In an effort to limit the American taxpayer's liability, Freddie Mac has announced it has obtained the first of three insurance policies this year designed to cover the remaining credit risk associated with three of its Structured Agency Credit Risk (STACR) deals from 2014.

The three transactions, obtained under the Agency Credit Insurance Structure (ACIS), transfer much of the remaining credit risk associated with three STACR deals to private capital market investors and global reinsurers. The combined maximum limit of the policies is approximately $707 million of losses on pools of single-family loans acquired in 2013 and the first quarter of 2014.

"The three ACIS executions right out of the gate this year reinforces our commitment to programmatic and efficient transactions," said Kevin Palmer, vice president of Freddie Mac's single-family strategic credit costing and structuring.

"Combined with our ACIS transaction in December, we have now acquired more than $860 million in additional insurance coverage since our last STACR transactions in October 2014,” Palmer added. “Similar to previous deals, this transaction also includes new participants as we continue to mature and further expand our panel of counterparties."

Through STACR and ACIS, Freddie Mac said it has laid off a substantial portion of credit risk on more than $205 billion of unpaid principal balance in single-family mortgages since the programs’ first offerings in mid-2013.

Following the housing bust, lenders became hesitant about lending because they had to repurchase billions of dollars of bad mortgages they sold to Fannie Mae, Freddie Mac and private investors. The industry is afraid if they loosen their standards, the same thing will happen again.

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