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GSE News | Fannie/Freddie Share Statistics
Fannie, Freddie and FHLB news. Coverage of government sponsored enterprise regulation, operations and litigation.

Fannie Unloads Risk on SFR Loans

Credit coverage obtained from M.I. firm

Oct. 10, 2013

By Mortgage Daily staff

The Federal National Mortgage Association has moved risk off of its balance sheet to a mortgage insurance company. The risk-sharing deal follows a similar move by rival Freddie Mac three months ago.

Fannie Mae disclosed a risk sharing transaction on Thursday. More than $5 billion in single-family loans are involved in the deal.

Credit coverage insurance on the transaction went into effect on Sept. 1, according to the announcement Thursday from the secondary lender.

On the other side of the agreement was National Mortgage Insurance Corp.

Loans included in the deal were acquired by the Washington, D.C.-based company in the fourth-quarter 2012.

Original loan-to-value ratios were between 70 and 80 percent. With the risk transfer, Fannie's risk is limited to around a 50 percent LTV ratio subject to a deductible amount and aggregate loss limits.

The Federal Housing Finance Agency's Conservatorship Scorecard for 2013 calls for Fannie to transfer credit risk on at least $30 billion in single-family that it owns. Fannie expects to complete additional transactions this year that will enable it to meet its goals.

FHFA lauded Fannie in a news release for completing its first risk-sharing transaction.

"This transaction supports FHFA's 2013 Conservatorship Scorecard and FHFA's Strategic Plan for the enterprise conservatorships by transferring credit risk to the private sector and reducing Fannie Mae's footprint in the marketplace," FHFA's announcement stated. "This transaction also gives further insight into how the private sector prices mortgage credit risk, further reduces taxpayer exposure to that risk and demonstrates an approach to risk-sharing."

Freddie announced in July that it offered a single-family credit-risk sharing transaction for $0.5 billion. The Structured Agency Credit Risk, or STAR, Debt Notes, Series 2013-DN1, was increased from $0.4 billion due to strong investor demand. The deal involved the participation of "about 50 broadly-diversified investors" including mutual funds, hedge funds, REITS, pension funds, banks, insurance companies and credit unions.

Fannie Mae profile

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