Archive

November 9, 2009

Freddie Lists Its Mortgage Insurance Risk at $63.4 Billion

Over the past nine months Freddie Mac has received $658 million from mortgage insurance firms to cover losses on delinquent loans, but in a new public filing the GSE reveals that if the MI industry collapses its risk exposure would be $63.4 billion. Eight different MI firms have written policies on Freddie Mac loans with MGIC and Radian being the two largest in terms of outstanding coverage, $15.5 billion and $12.1 billion, respectively. Despite the shaky state of the housing market not one MI has failed, though one company, Triad Guaranty, is in self-liquidation mode. In a filing with the Securities and Exchange Commission, Freddie notes that it has "institutional credit risk" relating to "the potential insolvency or nonperformance of mortgage insurers" that cover its loans. But the GSE also says that based on "currently available information" it expects that all of its MI counterparties will continue to pay claims even though many have received "credit watch negative" ratings. The $63.4 billion figure represents the "remaining aggregate contractual limit for reimbursement of losses" of principal, Freddie says.