Freddie Mac has expanded its Agency Credit Insurance Structure (ACIS) program with ACIS Forward Risk Mitigation (AFRM), a front-end credit risk transfer (CRT) offering that allows the GSE to transfer mortgage credit risk simultaneously with the acquisition of loans by securing committed private capital and providing stable pricing over a two-year horizon through the end of 2019.
AFRM shifts a portion of the mortgage credit risk on pools of single-family loans with a combined unpaid principal balance of approximately $21 billion to a diverse panel of reinsurers, providing insurance coverage with a maximum limit of approximately $650 million, according to Freddie Mac. This covered pool will consist of 30-year fixed-rate loans with loan-to-value ratios between 60% and 97%, with a structure similar to Freddie Mac’s core ACIS offering.
The company says it will continue to offer core ACIS insurance policies on a programmatic basis.
“AFRM is the first CRT product to secure private capital from investors committed to provide coverage on loans funded over the next two years and represents an important milestone in the expansion of the ACIS program,” says Gina Subramonian Healy, vice president of credit risk transfer. “We’ll continue to explore ways to evolve our front-end CRT offerings to transfer more credit risk away from taxpayers and provide investors new ways to invest in the U.S residential housing market.”
Since the ACIS program’s inception in 2013, Freddie Mac has placed nearly $9 billion in insurance coverage while expanding its investor base. Since 2013, the company has transferred a portion of credit risk on approximately $872 billion of UPB on single-family mortgages. The company has grown its investor base to more than 220 unique investors, including insurers and reinsurers.