(Reuters) – Fannie Mae <FNMA.PK> 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.
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)