Fannie Mae said on Friday it secured commitments for a second transaction under which the U.S. mortgage finance agency will transfer some credit risk to reinsurers on $15 billion worth of single-family home loans it plans to buy from lenders.
Continue Reading Below
This type of security is aimed at reducing Fannie Mae's exposure to defaults, which soared during the housing bust about a decade ago.
Coverage and pricing for the risk transfer deal are committed for 12 months for loans it acquires in the first quarter, Fannie said.
The Washington-based company said it will retain risk for the first 50 basis points of loss on the pool of loans tied to this deal.
If this $75 million "retention layer," or cushion for loan losses, is exhausted, the participating mortgage insurance companies will cover the next 250 basis points of loss on the pool, up to a maximum coverage of approximately $375 million, it said.
Fannie added that it will continue to offer credit risk transfer deals that cover existing mortgages on its portfolio.
The company's total book of business was $3.144 trillion at the end of 2016.
Since 2013, it has transferred a portion of its risk on possible defaults on more than $896 billion worth of single-family mortgages.
(Reporting By Richard Leong; Editing by Jonathan Oatis)