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

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.

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David Finkelstein & Andreas Strzodka & James Vickery, Credit risk transfer and de facto GSE reform, Federal Reserve Bank of New York, Staff Reports 838, 01 Feb 2018.
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Keywords: mortgage; credit risk transfer; securitization; Fannie Mae; Freddie Mac; GSE
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