Credit risk transfers

JPMorgan Chase & Co. plans to sell credit risk on a $531 million portfolio of adjustable-rate mortgages, a new kind of offering by the bank and the latest example of the industry's efforts to de-risk balance sheets.

The credit-insurance risk transfer deal from Fannie Mae covers risk from $9 billion in single-family loans and includes a new LTV identifier for the first time.

The conflict of interest rule for securitizations doesn't appear to discourage routine transactions, but could add to nonbank compliance costs.

The loan pool consists of approximately 34,000 single-family mortgages with unpaid principal balances near $11.5 billion.

The real estate investment trust arm of two affiliate mortgage-related companies could reduce other debt and finance purchases of loans, servicing or securities.

The government-sponsored enterprise has shared $25.2 billion of insurance coverage through its Credit Insurance Risk Transfer program.

But on a cumulative basis since 2013, the unpaid principal balance of reference pools is higher at Freddie Mac, according to the Federal Housing Finance Agency.

In total, around 98,000 loans with a principal balance of $31.8 billion are in the cover pools for the two new insurance-based transactions.

The government-sponsored enterprises will likely have their mainstay bonds exempted from the potential securitization-related rule, but their credit-risk transfers could be subject to it, some experts say.

The numbers show that volume has been strong despite volatility in the market that at one point delayed a CRT deal from competitor Fannie Mae.