Fannie Mae to resume credit risk transfers in October


Fannie Mae will resume selling chunks of her credit exposure to private investors in the last three months of the year, but is still evaluating her strategy for 2022.

The move will restore to full capacity a market that was operating at half-speed, but the new show is unlikely to make up for ground lost since the agency suspended these transactions in March 2020.

In a brief announcement, Fannie Mae said she would resume CRT trading in the fourth quarter, through its Connecticut Avenue Securities and Credit Insurance Risk Transfer programs.

“The CRT market has been a constant source of credit related products for the private label mortgage market as a whole,” said Vadim Verkhoglyad, vice president and head of quality assurance and co-head of research and development. publications at dv01. “They play a key role in market liquidity, credit transparency and investor participation in direct credit for mortgage borrowers.”

The show is slated to begin in October, according to a recovery FAQ. CAS transactions can be placed on the market during four issuance windows: mid-October, end of October, mid-November and mid-December. But the company added that it could choose not to issue at certain times.

Fannie Mae also plans to enter into single-family CIRT and multi-family CIRT in October, but she will not be issuing any multi-family CAS agreement this year.

As for 2022, “the structure and extent to which we engage in other credit risk transfer transactions in the future may be affected by our capital requirements, the degree of capital relief. regulations provided by transactions, our appetite for risk, the strength of future market conditions, ”reads the FAQ. “We are continuing to assess our CRT strategy for next year and are not currently communicating any outlook.”

Fannie Mae has not issued any CRT issues since March 2020, partly due to the market disruption by COVID-19, but also due to a change in the capital framework of government-sponsored companies by the former Director of the Federal Housing Finance Agency, Mark Calabria, who increased the risk weight for these securities. Acting Director Sandra Thompson is consider revising the framework.

In light of this, as well as suspension last-minute changes made by the Trump administration to the preferred share purchase agreement, industry watchers expected Fannie Mae to resume the CRT activity.

“For almost 2 years, the primary cathode ray tube market operated at less than half of its capacity with Fannie Mae largely absent,” Verkhoglyad said. “Their return to the programmatic show will both provide additional offering and help stem repayments from Fannie’s existing CRT program.”

However, this new issue will barely make up for the monthly reduction in Fannie’s existing CRT portfolio, he said.

But the health of the PLS market is a positive indicator for the cathode ray tube market, since it has largely recovered from the upheavals of the first days of the pandemic.

“Depreciations and defaults have declined significantly from their post-COVID-19 peaks, as evidenced by our reports and continue to decline each month,” Verkhoglyad said. “Additionally, the newly issued loans largely avoided the COVID-related write-downs, which emerged massively in mid-2020.”

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