Fannie Mae Calls on Reinsurers to Back Mortgage Pool

Fannie Mae bought insurance to cover a portion of losses on $6.4 billion of home loans in the mortgage giant’s latest effort to share risks with private investors.

The policy will cover as much as $193 million of losses on a pool of mortgages with a group of domestic reinsurers taking on that risk, according to a statement from the Washington-based company today. The loans backing the debt were acquired by Fannie Mae in the first quarter and have 30-year terms.

Fannie Mae expects the new structure will serve as a template for similar deals, according Andrew Bon Salle, an executive vice president at the lender. The opportunity to use reinsurers offers an attractive source of capital because the sector currently has little exposure to the U.S. residential mortgage market, Bon Salle said in the statement.

The Federal Housing Finance Agency ordered Freddie Mac and Fannie Mae to engage in risk-sharing transactions to gain insight into how the private sector takes potential losses into account when pricing transactions and to reduce taxpayer risk.

–With assistance from Jody Shenn in New York.