Page 30 - The GSE Report March-April 2018

FANNIE MAE AND FREDDIE MAC MJARN.U-ARPYR.20210818
forward for long-term reform of mortgage market since the GSE conservatorships began in 2008. Although the details of these proposals vary, they generally share in common the goals of (1) ensuring that mortgage credit risk is borne by the private sector (probably with some form of government backstop and/or tail insurance to insure catastrophic
risk and stabilize the market during periods of stress), while (2) maintaining the current securitization infrastructure as well as the standardization and liquidity of agency MBS markets. The credit risk transfer program, now into its fifth year, represents an effective mechanism for achieving these twin goals. (Credit Risk Transfer and De Facto GSE Reform, David Finkelstein, Andreas Strzodka and James Vickery, February 2018)
Pursuant to FHFA’s 2018 Scorecard, Fannie and Freddie are required to lay off risk on 90% of newly acquired loans in categories targeted for transfer. “Fannie Mae’s CAS issuances to date cover 35.6% of its guarantees, while Freddie’s STACR covers 53.3%,” wrote Urban Institute analysts. (Housing Finance at a Glance, Urban Institute, April 2018)
In the Credit Risk Transfer Progress Report for the Fourth Quarter of 2017, the FHFA wrote:
From the beginning of the Enterprises’ Single-Family CRT programs in 2013 through the end of 2017, Fannie Mae and Freddie Mac have transferred a portion of credit risk on $2.1 trillion of unpaid principal balance (UPB), with a combined Risk in Force (RIF) of about $69 billion, or 3.2 percent of UPB. An additional $972 billion of UPB and $246 billion of RIF
has been transferred to primary mortgage insurers from 2013 through the end of 2017... Through CRT and mortgage insurance, the majority of the underlying mortgage credit risk on mortgages targeted for CRT has been transferred to private investors.
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