Freddie Mac has completed a risk-sharing transaction where a private reinsurance agency agreed to cover up to $77 million of credit losses on a $22 billion pool of single-family loans.
This reinsurance was secured on the same pool of loans that Freddie used for its
The reinsurance policy simply reduces Freddie’s loss exposure on the underlying loan pool.
"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 future,” says Freddie executive vice president David Lowman.
The single-family loans underlying the STACR deal and the reinsurance policy were funded in the third quarter of 2012.
The reinsurance policy is underwritten by Arch Reinsurance Ltd., based in Hamilton, Bermuda. “This transaction demonstrates Arch’s strong support for Freddie Mac’s strategy to share credit risk with the private sector,” the company says.
