Freddie Mac Reduces Taxpayer Exposure With $269.5 Million Credit Risk Insurance Policies

MCLEAN, VA--(Marketwired - Apr 24, 2014) - Freddie Mac (OTCQB: FMCC) announced today that it has obtained insurance policies underwritten by a group of well-capitalized and established insurers and reinsurers. The policies cover up to a combined maximum of $269.5 million of losses for a portion of the credit risk associated with a pool of Single-Family loans funded in the first quarter of 2013.

The policies were obtained under Freddie Mac's Agency Credit Insurance Structure (ACIS), which has attracted private capital from non-mortgage guaranty insurers and reinsurers. It further demonstrates the company's business strategy to expand risk sharing with private firms to reduce taxpayers' exposure to mortgage losses.

"We have a good start on our goal to provide multiple avenues for sharing mortgage credit risk with a diverse spectrum of private investors," said Kevin Palmer, vice president of Single-Family strategic credit costing and structuring for Freddie Mac. "Global reinsurers represent a large source of capital, and they are interested in expanding their product line to cover Single-Family mortgages. This year, we expect to execute multiple insurance transactions and bring in additional insurance and reinsurance companies."

In addition, earlier this month Freddie Mac co-hosted with Aon Benfield a reinsurer industry day where representatives from 13 foreign and U.S. based reinsurance companies learned how Freddie Mac manages its residential mortgage risk. Palmer added, "Transferring some of our Single-Family risk to large, diversified global insurance and reinsurance companies help us to better manage our risk."

Freddie Mac has led the market in introducing new risk-sharing initiatives with four STACR debt note offerings and now two ACIS transactions involving three policies. The first ACIS occurred in Nov. 2013 and covered up to $77.4 million in credit losses. Through STACR and ACIS, Freddie Mac has laid off loss risk on more than $95 billion in qualifying Single-Family mortgages.

Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation's residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Today Freddie Mac is making home possible for one in four home borrowers and is one of the largest sources of financing for multifamily housing. Additional information is available at FreddieMac.com, Twitter @FreddieMac and Freddie Mac's blog FreddieMac.com/blog.