A progress report on the Federal Housing Finance Agency’s (FHFA) credit risk transfer program included information about the status and volume of credit risk transfer transactions through the end of 2016.
The report details how Fannie Mae and Freddie Mac (the enterprises) transfer a portion of credit risk to the private sector through various transactions in the single-family and multifamily markets.
It indicates that of the $548 billion in mortgages with unpaid principal balances (UPBs) in 2016, the enterprises transferred $18 billion of credit risk through capital markets, insurance and pilot credit risk transfer (CRT) transactions.
“Fannie Mae and Freddie Mac have made credit risk transfer a regular part of their business and they continue to improve and expand the scope of their programs and explore different transaction structures,” FHFA Director Melvin L. Watt said in a press release. “This report demonstrates the ongoing innovation, the progress being made, and our commitment to transparency as we continue to enhance these programs.”
The National Association of Federally-Insured Credit Unions (NAFCU) noted in a recent press release that the FHFA’s report shows “a significant uptick in the number of front-end transactions, but the total credit risk transfer transactions performed in 2016 was about 4 percent.”
In October 2016, the NAFCU addressed its concerns about the agency’s proposals to adopt additional front-end credit risk transfer structures, without safeguards ensuring a level playing field, stating that: “Limiting front-end credit risk transactions to only those that are ‘economically sensible’ has the potential to force credit unions out of the mortgage market; Requiring public disclosure of the details of transactions for loans sold to the GSEs will impose burdensome expenses on credit unions; and Establishing a level playing field for all lenders must include consideration of the unique structure and constraints of credit unions so they are not disadvantaged against larger lenders.”
Since the program’s inception in 2013, the enterprises have transferred nearly $49 billion of credit risk on $1.4 trillion UPB, according to the report, which the FHFA noted is subject to regular updates.