Freddie Mac Continues to Reduce Credit Risk With a New ACIS Insurance Policy for a Combined $132.5 Million Limit

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The FINANCIAL — Freddie Mac announced on September 28 that it has obtained another actual loss insurance policy under its successful Agency Credit Insurance Structure (ACIS) program, which is tied to a Structured Agency Credit Risk (STACR) actual loss deal. Through ACIS, Freddie Mac obtains insurance policies that transfer to insurance and reinsurance companies around the globe, a portion of the credit risk associated with its STACR debt note reference pools.

This new transaction transfers much of the remaining credit risk associated with the first actual loss STACR offering last April, STACR Series 2015 DNA1. This policy transfers up to a combined maximum limit of approximately $132.5 million of losses on a pool of Single-Family loans acquired in the fourth quarter of 2012, according to Freddie Mac.

“We continue to expand the panel of participating reinsurers as the ACIS program matures,” said Kevin Palmer, vice president of Freddie Mac’s Single-Family strategic credit costing and structuring. “We have now acquired more than $1 billion in additional insurance coverage this year with six ACIS transactions, and almost $2 billion since the program’s inception in 2013. This transaction includes new and past participants as we strive for consistency in how and where we transfer credit risk.”

In July the company completed its first two ACIS transactions that provided coverage based on both first loss and actual losses realized on a reference pool of residential mortgages.

Freddie Mac has led the market in introducing new risk-sharing initiatives with 15 STACR offerings, including first loss and actual loss risk transactions, and now 10 ACIS transactions since mid-2013. Through STACR and ACIS, Freddie Mac has laid off a substantial portion of credit risk on more than $333 billion of UPB in single-family mortgages. Freddie Mac was the first agency to market credit risk transfer transactions with STACR and ACIS, and has since grown its investor base to more than 160 unique investors.

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