American International Group Inc. is making plans to securitize through an indirect subsidiary that has been acquiring high-credit-quality jumbo mortgages.
"They're comfortable putting 30-year fixed-rate loans on their books based on their own asset liability needs and now they're viewing securitization as a potential alternative," said Roelof Slump, a managing director at Fitch Ratings. Fitch conducted an operational assessment of the company last month.
AIG does not plan to expand credit, acquire riskier loans or allow loan-to-value or credit score exceptions, although it will allow other documented underwriting exceptions with mitigating factors on 10% of acquisitions. It acquires loans on a flow basis from 70 correspondent sellers.
The United Guaranty unit that AIG sold in January to Arch Capital Group previously had been part of a loan-purchase unit at AIG called Connective Mortgage Advisory Co.
Connective had no plans to securitize when it was formed in 2013, but after AIG sold UGC and absorbed Connective, AIG became more interested in new types of residential mortgage expansion.
The UGC sale has helped AIG free up capital that can be used to "gradually increase the scale of the activity that we are doing in a number of ways in residential mortgage loans," said AIG Chief Investment Officer Doug Dachille in an investor presentation late last year.
AIG went through a $180 billion government bailout in 2008 in part due to its indirect exposure through complex financial instruments to the market-wide subprime mortgage collapse. But by 2012, the company through asset sales had repaid the U.S. and generated $22 billion in profit.