We're celebrating an important corporate milestone – the transfer of a significant amount of mortgage credit risk on $650 billion in unpaid principal balance of single-family and multifamily loans. This is good for the market and the taxpayer, creating new asset classes for investors and transferring risk away from Freddie Mac to the private market.
The $650 billion amount represents $500 billion associated with single-family loans since 2013, and first-loss risk on $150 billion in multifamily loans since 2009.
Simply put, private capital is now absorbing large amounts of mortgage credit risk which was previously supported by the U.S. taxpayer.
To reach this milestone, Freddie Mac has been evolving its risk management framework and practices since the financial crisis and now sets the standard for transferring mortgage credit risk to private investors.
When Freddie Mac debuted its first official credit risk transfer program in 2009 with the multifamily K-Deal security, it began blazing the trail in this market space. K-Deals transfer the substantial majority of credit risk to private market investors on multifamily mortgages. In 2013, the company created a new asset class by pioneering the transfer of credit risk on single-family mortgages when it introduced both Structured Agency Credit Risk® (STACR®) debt notes, which are sold to bond market investors, and Agency Credit Insurance Structure® (ACIS®), which transfers risk to insurance companies. K-Deals and STACR have evolved as notable brand names in the investment community, and demand continues to grow steadily for these flagship programs as new investors participate in them.
Freddie Mac followed up on this success and further diversified its investor base with additional and innovative structures, including Whole Loan SecuritiesSM (WLSSM) and SB-Deals (multifamily small balance loans) in 2015 and Multifamily Structured Credit Risk Notes (SCR Notes) in 2016.
Our growing and evolving credit risk transfer program enables us to reach an expanding and diverse investor base, reduce credit risk transfer costs and weather dynamic market and economic conditions. The result is simply a better and stronger U.S. housing finance system, and that's good for everyone. $650 billion and still going strong.