Page 32 - The GSE Report March-April 2018

FANNIE MAE AND FREDDIE MAC MJARN.U-ARPYR.20210818
• Both Enterprises executed front-end CRT transactions – transferring risk at the time the mortgages were acquired –with forward commitments, and utilizing reinsurers and affiliates of mortgage insurance companies.
“The Enterprises continue to make tremendous progress with credit risk transfer as they benefit from strong private sector market demand,” said FHFA Director Melvin L. Watt. “This report reaffirms our steadfast commitment to reduce risk to taxpayers and to do so in a transparent way that continues to attract and expand private sector investment.” (Credit Risk Transfer Progress Report for Fourth Quarter 2017, Federal Housing Finance Agency, 03/29/18)
Fannie Mae and Freddie Mac have reached the “terminal level” for their mortgage portfolios
Fannie Mae and Freddie Mac have liquidated their mortgage assets and have begun shrinking
their less liquid mortgages. Both GSEs’ mortgage portfolios are now below the $250 billion
GSES UNDER CONSERVATORSHIP
maximum portfolio size—the so called “terminal level” that FHFA required the enterprises to reach
GSE PORTFOLIO WIND-DOWN
by year-end 2018. Fannie Mae met FHFA’s terminal level target in 2017 and Freddie Mac met this
level in February 2018. (Housing Finance at a Glance, Urban Institute Housing Finance Policy Both GSEs continue to contract their portfolios. Since February 2017, Fannie Mae has contracted by 18.1
Center, April 2018)
percent and Freddie Mac by 16.5 percent. They are shrinking their less-liquid assets (mortgage loans and non- agency MBS) faster than they are shrinking their entire portfolio. The Fannie Mae and Freddie Mac portfolios are now both below the $250 billion maximum portfolio size; they were required to reach this terminal level by year end 2018. Fannie met the target in 2017, Freddie met the target in February 2018.
FANNIE MAE’S AND FREDDIE MAC’S PORTFOLIO WIND-DOWN
Fannie Mae Mortgage-Related Investment Portfolio Composition
FNMA MBS in portfolio
Non-FNMA agency MBS
Non-agency MBS Mortgage loans
Current size: $223.6 billion
2018 cap: $250 billion
Shrinkage year-over-year: 18.1% Shrinkage in less-liquid assets year- over-year: 21.8%
($ billions)
900 800 700 600 500 400 300 200 100
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Sources: Fannie Mae and Urban Institute.
February 2018
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($ billions)
900
FHLMC MBS in portfolio
Non-FHLMC agency MBS
Non-agency MBS Mortgage loans
Current size:$246.7 billion 32 2018 cap: $250 billion
Shrinkage year-over-year: 16.5% Shrinkage in less-liquid assets year-
Freddie Mac Mortgage-Related Investment Portfolio Composition
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800