Freddie Mac's credit risk transfers set records for 2Q, first half

Freddie Mac on Tuesday reported that its single-family credit risk transfer activity set records for the second quarter and first half.

The government-sponsored enterprise issued approximately $6.5 billion between April and June, mitigating risks on mortgages with a total unpaid principal balance of around $151 million. That brought the first-half total to $15 billion in issuance, mitigating risks on $358 billion in loans.

The record numbers, which include Structured Agency Credit Risk and Agency Credit Insurance Structure deals, show Freddie's volume has been strong for the first half of the year despite volatility in the market that at one point delayed a CRT deal from competitor Fannie Mae.

"Freddie Mac's single-family CRT program delivered record performance," said Mike Reynolds, a vice president at the enterprise, in a press release.

Single-family CRT volume at Freddie has been on a tear since the start of the pandemic. Based on the unpaid principal balance of loans in reference pools, it more than doubled in 2020 and nearly did so again in 2021, according to the Federal Housing Finance Agency.

However, single-family CRT could slow in the second half of this year.

"We're expecting Q3, Q4 numbers to come down,"  Reynolds said in a recent webcast.

In addition to seeing strong issuance this year, Freddie Mac also has introduced some Agency Credit Insurance Structure innovations to the market.

One transaction solely used cash-out refinance loans as collateral. Another accelerated the placement of loans into the structure based on a proxy pool of securitized mortgages. That allowed Freddie to protect the loans involved in the deal at the time of purchase.

Freddie additionally tendered and had offers accepted for STACR notes with a total original balance of more than $4.5 billion in the first half.

"The tendered notes had substantially deleveraged and therefore no longer provide Freddie Mac with capital relief," the GSE said.

Capital rules have played a key role in driving CRT activity in recent years. Fannie Mae previously pulled back from the market because of an earlier version of them that would have been particularly onerous for CRT. That created a void Freddie worked to fill until its regulator signaled it would ease the rules. Fannie returned to the market soon after.