In the biggest test so far of efforts to get private investors to share more of the risk of mortgage defaults with Fannie Mae and Freddie Mac, Fannie Mae will sell $1.6 billion in risk-sharing certificates this week that are tied to $61 billion in home loans — including $14 billion in mortgages made to borrowers who made down payments of between 3 and 20 percent.

Demand for the risk-sharing certificates is so great that Fannie Mae will pay lower yields to investors than it had anticipated, the Wall Street Journal reports.

The sale is in line with efforts by the mortgage giants’ new federal regulator to expand access to credit in the mortgage market, the Journal reported. Last week the Federal Housing Finance Agency’s new director, Mel Watt, directed Fannie and Freddie to boost the amount of risk they share with private investors.

In his first public remarks since taking on his new role, Watt said FHFA expects Fannie and Freddie to triple the amount of “risk transfers” from $30 billion of unpaid principal balance transfers last year to approximately $90 billion this year. Source: Wall Street Journal via

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