Freddie Mac has announced a new front-end credit risk transfer offering, Freddie Mac Deep MI CRT. Through a forward credit insurance policy by a panel of mortgage insurance company affiliates, this pilot structured transaction provides additional coverage beyond the primary mortgage insurance on 30-year fixed-rate mortgages (FRMs) with 80-95 percent LTVs—which is placed immediately upon their sale to Freddie Mac. Transactions are executed via a competitive, transparent auction process.
"Deep MI CRT builds on the success of our Agency Credit Insurance Structure (ACIS) program and is the first credit risk transfer offering in the market with a flow-basis structure on loans purchased from our diverse lender base," said Kevin Palmer, senior vice president of credit risk transfer at Freddie Mac. "The pricing certainty provided by day one coverage offers us an economically sensible way to transfer mortgage credit risk away from taxpayers. Deep MI CRT embodies all the core elements of our single-family credit risk transfer program, and also helps us expand our important relationships with mortgage insurers. Risk transfer outside of the capital markets is a meaningful part of our single-family credit risk transfer strategy and we continue to explore options to expand our front-end risk transfer offerings.”
Freddie Mac has led the market in introducing new credit risk-sharing initiatives with Structured Agency Credit Risk (STACR) debt notes, ACIS and Whole Loan Securities (WLS), and was the first agency to market these types of credit risk transfer transactions.
"MBA appreciates Freddie Mac’s efforts to bring more private capital into the market through the credit-risk transfer offering they recently announced," said David H. Stevens, CMB, president and CEO of the Mortgage Bankers Association (MBA). "In this early stage of the credit risk transfer market, it is important to experiment with different transactions and structure types to evaluate their long term economic and competitive impact. Mortgage insurance offers a well-developed, scalable solution that would benefit consumers and is something that all lenders could use today."
