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Fannie Mae Plans To Restart Credit Risk Transfers In 2021

David Krechevsky
Sep 21, 2021
Fannie Mae HQ

Paused Since March 2020, New CRT Transactions To Begin In October

  • Fannie Mae paused CRT transactions last year after changes were proposed to capital requirements framework.
  • Recent revisions proposed by FHFA would 'encourage the distribution of credit risk' by Fannie Mae & Freddie Mac

The Federal National Mortgage Association, or Fannie Mae, announced Monday it intends to resume credit risk transfer (CRT) transactions in the fourth quarter of 2021.

Fannie Mae paused its CRT transactions in March 2020, after the Federal Housing Finance Agency (FHFA) developed a framework requiring high capital requirements for both Fannie Mae and the Federal Home Loan Mortgage Corp. (Freddie Mac). The more strict capital requirements were developed under the previous administration.

Last week, FHFA announced it is seeking comment on a proposal to amend the Enterprise Regulatory Capital Framework (ERCF) for both Fannie Mae and Freddie Mac (the Enterprises). The agency said the proposed amendments “would refine the prescribed leverage buffer amount (PLBA) and the capital treatment of credit risk transfers to better reflect the risks inherent in the Enterprises’ business models and to encourage the distribution of credit risk from the Enterprises to private investors.”

Fannie Mae said Monday it expects to transfer mortgage credit risk via its Connecticut Avenue Securities (CAS) and Credit Insurance Risk Transfer (CIRT) programs.

Specifically, Fannie Mae said it expects “bring to market Single-Family Connecticut Avenue Securities (CAS), Single-Family Credit Insurance Risk Transfer (CIRT) and Multifamily CIRT (MCIRT) transactions” in October 2021. It said additional transactions via these programs may be brought to market during the remainder of the year.

It added that it currently does not plan to issue Multifamily Connecticut Avenue Securities (MCAS) this year.

According to Fannie Mae, $2.23 trillion in total unpaid principal balance of mortgage loans has been partially covered by Single-Family CRT vehicles at issuance as of the second quarter of 2021. In addition, $109.91 billion in total unpaid principal balance of multifamily mortgage loans has been covered through MCAS and MCIRT as of the second quarter of 2021.

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