The Federal Home Loan Mortgage Corporation (Freddie Mac) has closed its second Multifamily Credit Insurance Pool (MCIP) offering, MCIP 2019-R2.
The transaction reinsurers risk on a $1.87 billion reference pool made up of 88 multifamily loans.
Partnering with reinsurance broker Aon, The U.S government-sponsored mortgage giant retains the first .75% of losses, and has purchased credit risk insurance for the next 4.5% of credit losses on the reference pool which consists of conventional and affordable loans in Freddie Mac’s Multifamily Participation Certificate program.
It has been confirmed that there are a total of eight reinsurers participating in this transaction.
In MCIP transactions, Freddie Mac enters into long-term credit insurance contracts whereby a portion of any credit losses that occurs from existing multifamily loans in the company’s portfolio or bonds that Freddie Mac fully guarantees is covered by reinsurers.
By transferring a percentage of credit risk to reinsurers, Freddie Mac reduces its need to hold capital for the underlying loans in the pool. Freddie Mac announced the first MCIP transaction, MCIP-2018-1, under the new risk transfer program in January of this year.
