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Hedge Funds Drawn to Fannie-Freddie Risk-Sharing Plan

Bond buyers are vying with insurers to strike deals with Fannie Mae (FNMA) and Freddie Mac as their regulator seeks to draw private capital to the government- dominated mortgage market.

The taxpayer-supported companies, which own or guarantee $5 trillion of residential debt, have held discussions with NMI Holdings Inc., a new mortgage insurer that raised $500 million in April, as they explore new ways of sharing risks. American International Group Inc. (AIG) is also interested, while Angelo Gordon & Co. and Pine River Capital Management LP are among fixed- income investors that could jump on the opportunity.

Fannie Mae and Freddie Mac, which help finance about two- thirds of new U.S. home loans, are seeking to shrink their footprint and reduce the danger to taxpayers four years after being rescued. While no deals have been announced, the Federal Housing Finance Agency says progress is underway. The regulator in March set a target of last month for their initiation.

“It’s been a really long time coming,” said Merrill Ross, a Wunderlich Securities Inc. analyst who covers real estate investment trusts that could be participants.

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