MCLEAN, VA-Freddie Mac continues to tweak and twist its financial products and strategies to meet changing market demand and new political realities. In its latest initiative, the GSE has announced it has obtained an insurance policy underwritten by Arch Reinsurance Ltd. to cover up to $77.4 million of credit losses for some of the risk associated with a pool of single-family loans funded in the third quarter of 2012.

"We see this as part of Freddie Mac's larger goals of being able to transfer credit risk to the private sector and finding new sources of capital," Kevin Palmer, vice president of strategic credit costing and structuring, tells GlobeSt.com.

He points to similar initiatives, namely the two STACR debt offerings and credit insurance. The STACR debt notes were among the largest credit security offerings in the market.

The credit policy it has obtained with Arch in this latest move will open the door to further transactions, Palmer says. Traditionally GSAs have obtained insurance through the monoline insurance companies. By tapping the property & casualty reinsurance market providers—few of which have much exposure to mortgage securities on their balance sheets--borrowers will ultimately have access to broader and more global sources of capital.

Indeed, the GSE stated that the chief goal of the coverage is to attract new sources of private capital from non-mortgage guaranty insurers and reinsurers interested in assuming a portion of the credit risk on specified portions of Freddie Mac's single-family mortgage loan portfolio. "We expect to do more of these transactions now that we have worked through the first," Palmer says, "which is always the most difficult." For borrowers and investors the new insurance players will enjoy greater certainty of coverage because of the differences in how reinsurers and monoline insurance companies operate, Palmer says—namely the former are more limited in what kind of claims they can deny.