GSE CRT portfolios mark month-over-month improvement in delinquencies

Month-over-month delinquencies in the reference pools that back the credit-risk transfer programs of Fannie Mae and Freddie Mac showed noteable improvement in newly released monthly reports, according to DBRS Morningstar.

The December monthly statements detailing delinquency levels for Freddie's Structured Agency Credit Risk (STACR) reference pools were "generally lower" in the November activity period, DBRS Morningstar said in a report issued Wednesday.

Fannie's Connecticut Avenues Securities (CAS) were also "largely improved" for October, the latest available activity period for CAS pools. (Fannie's CRT reporting lags Freddie's by one month, according to the agency.)

Of 39 CAS deals tracked by the agency, nearly all issued between 2016 and 2020 showed delinquencies falling from 2%-6% (with an average 18 basis points decline) in the December reporting period compared to November, marking the second straight month of lower deliquencies.

Several 2013- and 2014-vintage CAS deals have much lower overall delinquency levels.

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DBRS Morningstar reported the details on 54 STACR deals showing an average deliquency rate decline to 5.04% from 5.21% in November's reporting period.

The monthly reports include details on 30-day to 180-plus day deliquency levels, the latter of which includes the largest share of the overall delinquency pipeline due to ongoing forbearance and moratorium programs that limit late-pay designation on earlier delinquency-period designations.

"Seasoned deals' delinquencies, particularly the earliest fixed severity reference pools (which continue to
see credit event loans leave the DQ pipeline), remain noticeably lower than later deal vintages," DBRS Morningstar added. "The 2018-19 deal vintages continue to have the highest delinquencies on average across all reference pools."

Both agencies' CRT shelves involve transferring partial risk from GSE-guaranteed loans to private investors. Since 2013, Freddie Mac has transferred a portion of credit risk on approximately $1.6 trillion in unpaid principal balance on single-family mortgages, involving an institutional investor base of about 250 firms. Fannie has partially covered about $1.5 trillion in unpaid mortgage balances to the private market.

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