Credit risk transfers

Delinquencies associated with the government-sponsored enterprises high loan-to-value ratio programs that target low-to-moderate income homebuyers are slightly better than expected, at least early on, according to Fitch.

Government-sponsored enterprise executives say they want to continue to offer credit risk transfers and guarantee-fee parity after the GSEs are released from conservatorship, but they might not be able to.

Freddie Mac will keep building on the financial reforms that produced profitability during conservatorship as broader government-sponsored enterprise proposals take shape, according to departing CEO Don Layton.

Fannie Mae is considering sharing more risk with the private sector to reduce future strain on its earnings from the implementation of the Current Expected Credit Loss accounting standard next year.

The residential mortgages being reinsured are less risky, by several measures, than its previous deal; none of the borrowers have ever missed a payment.

This time, investors required Radian to hold on to the first 2.5% of losses it covers on the pool; by comparison, the insurer’s previous deal, Eagle Re 2018-1, had a lower “attachment” point of 2.25%.

An emerging gap between the government-sponsored enterprises on a Federal Housing Finance Agency scorecard item is prompting Fannie Mae to diversify its multifamily credit risk transfer efforts.

While reinsurers are becoming more comfortable with the risk it is offloading, the GSE wants to maintain control of the workout process for loans that go bad.

Arch Capital’s next offering of credit risk transfer notes features heavy exposure to residential mortgages that have been modified by Fannie Mae or Freddie Mac.

Credit risk transfer does more than just reduce exposure to a downturn in the housing market. It also provides them with information about how others view mortgage credit risk.

Freddie Mac completed its first multifamily credit risk transfer transaction that used an insurance/reinsurance structure.

Dividing the transaction into two tranches allowed the GSE to tailor the transaction to the risk appetite of participants, lowering the cost of reinsurance.

Private-label residential mortgage-backed securitization is approaching a post-crisis high, according to Kroll Bond Rating Agency.

Laurel Davis, VP, credit risk transfer at Fannie Mae, explains why the switch to a REMIC structure for CAS is important, and why it took so long.

The company’s first transaction, Eagle Re 2018-1, transfers a portion of the credit risk on approximately $36.3 billion of mortgages, according to Morningstar Credit Ratings.

Fannie Mae and Freddie Mac transferred a substantial amount of credit risk to the private sector through both single-family and multifamily market transactions in the first half of the year, with activity expected to rise in 2019, according to the Federal Housing Finance Agency.

When the mortgage giant will be released from government control is anyone's guess, but the company's third-quarter report shows signs of an easier transition.

The structure reduces counterparty risk in the GSE's benchmark Connecticut Avenue Securities program; it also expands the investor base.

The mortgages being reinsured are more seasoned than most other deals rated by Morningstar, which helps offset the risk of lower initial weighed average LTV.

The REIT is purchasing another $500 million of credit risk transfer notes through Fannie's L Street Securities program; this is its first deal rated by Fitch.