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Federal Reserve Bank of New York
Economic Policy Review
Credit risk transfer and de facto GSE reform
David Finkelstein
Andreas Strzodka
James Vickery

The Fannie Mae and Freddie Mac credit risk transfer (CRT) programs, now in their fifth year, shift a portion of credit risk on more than $1.8 trillion of mortgages to private-sector investors. This study summarizes and evaluates the CRT programs, finding that they have been successful in reducing the exposure of the government-sponsored enterprises and the federal government to mortgage credit risk without disrupting the liquidity or stability of mortgage secondary markets. The programs have also created a new financial market for pricing and trading mortgage credit risk, which has grown in size and liquidity over time. In doing so, the CRT programs provide a valuable step forward in the reform of the U.S. housing finance system.

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David Finkelstein & Andreas Strzodka & James Vickery, "Credit risk transfer and de facto GSE reform" , Federal Reserve Bank of New York, Economic Policy Review, issue 24-3, pages 88-116, 2018.
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Keywords: mortgage; credit risk transfer; securitization; Fannie Mae; Freddie Mac; GSE
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