Credit risk transfers

The two latest transactions follow in the wake of the government-sponsored enterprise’s first deal of the year and the release of a finalized capital rule aimed at facilitating broader risk-sharing.

The transaction highlights the importance of giving the government-sponsored enterprises like Fannie access to a range of risk-sharing alternatives at a time when market volatility reportedly delayed another type of deal.

A group of 20 insurers and reinsurers provided coverage for the government-sponsored enterprise’s credit insurance risk transfer deal, which was the biggest in its category to date.

Issuance of capital market instruments aimed at protecting one government-sponsored enterprise from distressed mortgage credit events staged a relatively quick rebound in 2020, a new Federal Housing Finance Agency report shows.

Oaktree Re VI 2021-1 will market $531 million in CRT notes that will provide NMI with partial reinsurance on a $45B pool of GSE-eligible loans.

The $16.9 billion in issuance marked the biggest annual number seen since the government-sponsored enterprise reconstituted its risk sharing program in 2013.

If you are underbanked you probably have limited access to mainstream financial services normally offered by retail banks. Many fintech startups offer alternative ways to measure credit risk, and assert that their products can help extend financial services to consumers who have not been well-served by traditional banks.

The reference pools of mortgages supporting the credit-risk transfer notes sold by Fannie Mae and Freddie Mac were 'generally lower' in delinquencies per newly issued monthly reports, says DBRS Morningstar.

Fannie hasn't completed any credit risk transfers to private investors since the second quarter. Some experts worry the decision — likely spurred by the company’s concerns about a recent capital regulation — could put the mortgage giant on unsteady footing.

FSOC’s statement on the FHFA’s proposed capital rule raises questions for market participants trying to anticipate a post-conservatorship secondary mortgage market, should the incoming administration go through with the GSEs’ exit from governmental control.

While using the 30-day SOFR as its index, Freddie Mac structured the deal so it could shift to a one-month term if and when that rate is approved.

The GSEs began sharing their risk with the private market in new ways during conservatorship, and the Federal Housing Finance Agency’s proposed capital framework currently discourages the use of those strategies. Industry leaders voiced concerns in a FHFA listening session this week.

Following its deadline for written comments on the topic last month, the Federal Housing Finance Agency is scheduling events that will focus on two key themes emerging in responses.

Arch's second CRT transaction this year to obtain indemnity reinsurance for mortgage-insurance premiums comes at a time it is also experiencing rising 60-plus-day delinquencies on its outstanding securitized pools.

There were questions about the GSEs' use of structured credit risk transfers in the single-family market given an earlier pandemic-related market disruption.

The government-sponsored enterprise's earnings were up tenfold as it stabilized mortgage market liquidity amid the coronavirus.

A bond market once thought to be key to the futures of Fannie Mae and Freddie Mac — and the roughly $5 trillion of home loans they backstop — could instead find itself on the scrap heap due to their own regulator.

The FHFA looks to shed light on the amount of funds Fannie and Freddie will need to hold for their risk-sharing deals.

Not only is FHFA Director Mark Calabria preparing the GSEs to raise capital, but he must also help them decide just what they are selling to private investors in the way of equity returns and risk.

Fannie Mae's profitability suffered but it managed to stabilize the mortgage market in the first quarter even with the coronavirus disrupting, among other things, certain credit-risk transfer vehicles it has used.