Fannie to Share Data on 18 Million Mortgages to Woo Risk-Takers

Fannie Mae will release performance information for more than 18 million individual mortgages, joining rival Freddie Mac in taking the step as the government-controlled firms prepare to share risk with private investors.

The loan-level data being released covers 30-year, fixed-rate mortgages sold to or guaranteed by the company between January 2000 and March 2012, Washington-based Fannie Mae said today in an e-mailed statement. McLean, Virginia-based Freddie Mac said March 21 it would release similar information.

“Our goal is to enable better modeling and understanding of the credit performance of Fannie Mae loans,” Andrew Bon Salle, an executive vice president at the company, said in the statement. “Bringing private capital in to share some credit risk will help lay the foundation for a stronger mortgage finance system for the future.”

The Federal Housing Finance Agency, the regulator overseeing the conservatorships of Fannie Mae and Freddie Mac since they were seized by the U.S. in 2008, is seeking to reduce their role in the residential-mortgage market, where government-backed loans now account for more than 85 percent of lending. As part of the effort, the FHFA has been directing the companies to raise their bond-guarantee fees and put sharing risk on $60 billion of home loans among executives’ goals for this year.

Mortgage Revival

Along with a nascent revival in sales of mortgage securities without government backing, the risk-sharing is poised to provide investors such as real-estate investment trust Invesco Mortgage Capital Inc. with new ways to make money by wagering on homeowner defaults. The investors may earn higher returns than found on other investments by agreeing to take the initial losses on Fannie Mae and Freddie Mac loans.

“We believe this will be the beginning of a very meaningful opportunity for Invesco Mortgage Capital for years to come,” Richard King, the firm’s chief executive officer, said on a Feb. 6 earnings call.

The FHFA has directed Fannie Mae and Freddie Mac to structure their risk sharing deals this year in several ways. The options include using private insurers, selling bonds with both senior and junior classes and offering notes tied to loans that remain in traditional mortgage securities.

The nature of the data released by Freddie Mac gave “some information on the risk sharing structures that are being contemplated,” Amherst Securities Group LP analysts led by Laurie Goodman wrote last month in a report.

The Freddie Mac deals may be limited to fully documented 30-year, fixed-rate collateral, and investor losses will probably be triggered when loans go six months delinquent, rather than after foreclosures, the analysts wrote.

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