Freddie Mac and its GSE mate Fannie Mae amp up a new mortgage security.

The federal government is trying to get taxpayers off the hook for billions of dollars of potential losses if another mortgage crisis arrives—and in the process, it is quietly giving birth to a new asset class.

Wall Street Journal (sorry, it's a pay-gated site) staffer Joe Light reports on Fannie Mae and Freddie Mac ramping up sales for a new type of security that will transfer most of the cost of defaults on all but their safest mortgages to private investors. Here's the deal, per Light:

The insurance-like products are called Connecticut Avenue Securities by Fannie Mae and Structured Agency Credit Risk by Freddie Mac. Standard-issue bonds from the housing giants protect investors from the risk that home buyers will stop making payments on their loans. With the new securities, however, investors could lose some or all of their principal if the underlying mortgages default.

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