The issuance of credit risk transfers on traditional home loans rose to new heights in 2020 despite complications that emerged amid the pandemic, Freddie Mac reported Monday.
The $16.9 billion in issuance that transferred risk on more than $475.8 billion in mortgages was the highest annual amount seen since the government-sponsored enterprise reconstituted its risk sharing in 2013. In comparison, there was $12.2 billion in issuance that transferred risk on $252.9 billion in loans in 2019.
Record issuance in 2020 suggests that CRTs, which were tested by market dislocation and increased borrower payment challenges, have proved resilient and could rebound under current U.S. leadership.
“Despite a challenging environment, Freddie Mac’s single-family CRT program closed out its biggest year ever in 2020,” said Mike Reynolds, a vice president at the government-sponsored enterprise, in a press release. “Our effectiveness in managing risk and tailoring transactions to investor needs and market conditions, together with our ongoing commitment to leadership in this asset class, helped drive demand for our CRT products.”
Helping to boost Freddie Mac’s volumes in 2020 was the fact that its competitor,
Among the reasons for Fannie’s pullback from the market last year was the development of a
The Biden administration is expected to take a more favorable view of structured CRTs, which the GSEs were originally directed to engage by previous FHFA Acting Director Ed DeMarco during the Obama administration. But Biden’s
How CRT performance fares for investors going forward depends in part on the amount of borrowers who get back on track after putting their payments on hold to address coronavirus-related hardships. The Biden administration recently extended this forbearance through June.
At year-end, payments on 2.7% of Freddie’s single-family loans were on hold. That forbearance broke down as follows: 1.29% had been in forbearance for more than six months; 0.63%, three to six months; 0.37%, current; 0.23% one month; and 0.18%, two months.