Mortgage giant Fannie Mae has drastically curtailed the transfer of credit risk to private investors this year. This could hurt taxpayers, according to industry veterans, as the Trump administration seeks to give up control of government-sponsored businesses.
The shift is due in part to a new capital framework devised for Fannie and Freddie Mac by their regulator, the Federal Housing Finance Agency, and has resulted in the percentage of Fannie single-family loans with credit enhancement – loans that include factors like that transferred risk – down to 45% as of September 30, after 53% at the end of last year.
"That means the risk is focused back on Fannie and Freddie's balance sheet and more of it is being absorbed by the taxpayer," said Ed DeMarco, president of the Housing Policy Council and former acting director of FHFA, who started the credit risk transfer program in 2013 .
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