FHFA Cites ‘Tremendous Progress’ on Fannie, Freddie Credit Risk Transfers

The Federal Housing Finance Agency issued its quarterly Credit Risk Transfer Progress Report, noting Fannie Mae and Freddie Mac have made “tremendous progress” in credit risk transfer from strong private-sector demand.

The report said since the start of the 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 with a combined Risk in Force of nearly $69 billion. The program enables Fannie Mae and Freddie Mac to transfer a portion of credit risk to the private sector through a variety of transactions in the single-family market.

“The Enterprises continue to make tremendous progress with credit risk transfer as they benefit from strong private sector market demand,” said FHFA Director Melvin 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.”

Other report highlights:

–Fannie Mae and Freddie Mac transferred risk on $689 billon of UPB with a total RIF of $20.6 billion. Debt issuances, such as Structured Agency Credit Risk and Connecticut Avenue Securities, accounted for 69 percent of RIF;

–Freddie Mac expanded its STACR program to a new series of STACR debt notes, called SHRP, backed by loans that meet the Home Affordable Refinance Program eligibility criteria and have mark-to-market loan-to-value ratios between 60 and 150 percent, allowing Freddie Mac to transfer risk on some of its most seasoned loans.

–Both Fannie Mae and Freddie Mace executed front-end CRT transactions–transferring risk at the time the mortgages were acquired–with forward commitments and using reinsurers and affiliates of mortgage insurance companies.

The report can be accessed at https://www.fhfa.gov/AboutUs/Reports/ReportDocuments/CRT-Progress-Report-Q42017.pdf.