Concerns On Freddie’s New Risk-Sharing Pilot

Freddie Mac recently introduced a new form of risk sharing, dubbed the Integrated Mortgage Insurance (IMAGIN) program, in an attempt to enable lenders to sell the GSE low down-payment mortgages, according to National Mortgage News. In conjunction with Arch Capital, Freddie Mac is selling mortgage insurance to provide credit enhancement for the first loss position on low down payment mortgages. According to a Freddie Mac spokesman, “IMAGIN is an alternative structure for lenders to obtain charter-compliant credit enhancement solutions and to bring additional sources of private capital to support low down payment lending.” According to Compass Point, IMAGIN has been compared to lender-paid mortgage insurance, which accounted for 19% of newly written insurance policies in 2017.

However many mortgage insurers raised concerns that this is a case of charter creep from the Freddie. A concern cited is that there is not any public information about what the capital requirements are going to be and what the standards are,” according to Lindsey Johnson, Executive Director of the U.S. Mortgage Insurers Association.

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