Freddie Mac has announced that its Credit Risk Transfer (CRT) program transferred $9.1 billion of credit risk on $231 billion of single-family mortgages from U.S. taxpayers to the private sector in 2019. In 2020, Freddie Mac anticipates issuing between $12 and $16 billion in CRT offerings.
“2019 was an incredibly productive year for Single-Family CRT, as we brought 30 deals to market,” said Mike Reynolds, VP, Credit Risk Transfer. “2020 will be another ambitious year as we expect it to be our largest issuance calendar yet.”
Through its offerings, Freddie Mac issued approximately $1.8 billion across seven STACR and ACIS transactions in the fourth quarter—five on-the-run deals (DNA and HQA) and two seasoned deals (FTR). STACR DNA4 was Freddie Mac’s first REMIC (Real Estate Mortgage Investment Conduit) transaction.
As a result of STACR and ACIS on-the-run transactions this quarter, Freddie Mac transferred between 80% (high LTV HQA series) and 92% (low LTV DNA series) of the credit risk on the underlying reference pools, helping to reduce capital required under the Conservatorship Capital Framework.
Since the first CRT transaction in 2013, Freddie Mac’s Single-Family CRT program has cumulatively transferred $53 billion in credit risk on $1.4 trillion in mortgages. In a series of papers authored by former Freddie Mac CEO and Harvard Joint Center for Housing Studies (JCHS) Senior Industry Fellow Don Layton, Layton explained the purpose and role of the CRT.
“Today, over six years later, more than 70% of the credit risk on new single-family mortgages is transferred to private market investors,” said Layton. “Given that the two GSEs together have about $5 trillion of single-family mortgage credit exposure outstanding, this means very large amounts of risk are being transferred–something almost unimaginable when Freddie Mac introduced the first transaction as a somewhat experimental initiative in July 2013.