Freddie Mac has partnered with an insurer for the pilot of a new mortgage credit risk transfer program called Integrated Mortgage Insurance (IMAGIN).
To participate in the pilot, mortgage and property/casualty insurer and reinsurer Arch Capital Group established Arch MRT, a new subsidiary based in Washington D.C.
IMAGIN aims to provide an efficient structure for attracting a diversified and robust capital base to the US housing market that will support market stability through economic cycles. Under the pilot, Arch MRT will insure Freddie Mac and transfer 100% of the risk assumed to a panel of diversified, well-capitalized, and highly rated reinsurers that provide high-quality collateral assets in trust.
Arch Capital Group said the arrangement encourages additional participants and capital to support first-loss exposure in mortgages. Through a transparent process, the panel of reinsurers will competitively bid to provide, over the long term, lower cost mortgage insurance for borrowers.