As the GSEs remain in conservatorship of the Federal Housing Finance Agency (FHFA), the Enterprises are transferring more credit risk on their single-family residential mortgage loans to private capital markets investors in order to reduce risk to taxpayers. As part of working toward that goal, both Fannie Mae and Freddie Mac announced major credit risk transfer deals in the past week.
On Friday, Freddie Mac announced its intention to sell the 20th debt notes offering in the Structured Agency Credit Risk (STACR) series since the program began in mid-2013. The latest offering (STACR Series 2016-DNA2) is worth $916 million and features a reference pool of single-family mortgages recently acquired by Freddie Mac with an unpaid principal balance (UPB) of more than $30 billion.
On Thursday, Fannie Mae announced the completion of its 10th Credit Insurance Risk Transfer (CIRT) transaction since the program was launched in 2013. The latest CIRT deal (CIRT 2016-3) transfers a portion of credit risk on a pool of single-family mortgage loans with a UPB of approximately $5.7 billion. The risk was transferred to a single-insurer, according to Fannie Mae. The loans were acquired from May 2015 through June 2015 and the pool features 30-year fixed-rate loans with a loan-to-value (LTV) ratio between 60 and 80 percent.
“We continue to see strong interest from insurers and reinsurers in our CIRT program and look forward to pursuing additional opportunities to transfer risk to these parties in the future.”
Rob Schaefer, Fannie Mae
“We continue to see strong interest from insurers and reinsurers in our CIRT program and look forward to pursuing additional opportunities to transfer risk to these parties in the future,” said Rob Schaefer, VP for credit enhancement strategy & management, Fannie Mae. “Fannie Mae remains committed to leading efforts to bring private capital into the housing market.”
In slightly less than three years, Freddie Mac’s previous 19 STACR offerings combined with other risk-sharing initiatives such as two Whole Loan Securities (WLS) offerings and 16 Agency Credit Insurance Structure (ACIS) transactions, Freddie Mac has transferred a substantial portion of credit risk on single-family mortgages totaling more than $440 billion in UPB. Through the three programs (STACR, WLS, and ACIS), Freddie Mac has grown its investor base to approximately 200 unique investors, which includes reinsurers.
Fannie Mae’s credit risk transfer initiatives have resulted in the transfer of a portion of credit risk on $634 billion worth of single-family mortgages. Those initiatives include CIRT, the Connecticut Avenue Securities (CAS) series, and other forms of risk transfer.