If Freddie Mac's credit-risk transfer activities continue to grow, mortgage lenders could eventually see a reduction in the guarantee fees they pay to the government-sponsored enterprise, according to CEO Donald Layton.
Freddie Mac and Arch Capital are testing a new form of risk-sharing deal to boost investor appetite for low down payment mortgages. But the pilot is raising concerns about "charter creep" because it dictates private mortgage insurance decisions typically made by lenders.
A group of reinsurers has committed to provide up to $650 million of coverage for credit risk on some $21 billion of 30-year, fixed-rate loans that the government-sponsored agency will acquire over the next two years.
JPMorgan Chase is among four banks sued by a trustee for investors in the debt of Millennium Health LLC, alleging the lenders failed to inform them of a federal probe into the billing practices of the borrower.