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Credit risk transfer and de facto GSE reform

Andreas Strzodka, James Vickery () and David Finkelstein

No 838, Staff Reports from Federal Reserve Bank of New York

Abstract: We summarize and evaluate Fannie Mae and Freddie Mac?s credit risk transfer (CRT) programs, which have been used since 2013 to shift a portion of credit risk on more than $1.8 trillion of mortgages to private sector investors. We argue that the CRT programs have been successful in reducing the exposure of the federal government to mortgage credit risk without disrupting the liquidity or stability of mortgage secondary markets. In the process, the programs have created a new financial market for pricing and trading mortgage credit risk, which has grown in size and liquidity over time. The CRT programs provide an important building block to help facilitate reform of the U.S. housing finance system.

Keywords: mortgage; securitization; credit risk transfer; Freddie Mac; GSE; Fannie Mae (search for similar items in EconPapers)
JEL-codes: G10 G28 G23 G21 G18 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban and nep-ure
Date: 2018-02-01
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