Freddie Mac’s Single-Family business today announced that its Credit Risk Transfer (CRT) transactions transferred $5.1 billion of credit risk on $140.7 billion of single-family mortgages from U.S. taxpayers to the private sector in the first quarter of 2020.
“Freddie Mac Single-Family’s first-quarter CRT issuance significantly exceeded our first quarter totals from just a year ago, a result of our effort to accelerate the time from a loan’s acquisition to its placement in a CRT reference pool,” said Mike Reynolds, VP, Credit Risk Transfer. “In the face of the quarter’s challenging economic environment, the CRT program continued to show its value as a risk management tool.”
Through its flagship offerings, Freddie Mac issued approximately $4.5 billion across seven on-the-run DNA and HQA STACR and ACIS transactions in the first quarter. Subordination and lender risk sharing made up the balance of issuances in the quarter. As a result of STACR and ACIS on-the-run transactions this quarter, Freddie Mac transferred between 79% (high LTV HQA series) and 90 percent (low LTV DNA series) of the credit risk on the underlying reference pools.
Since the first CRT transaction in 2013, Freddie Mac’s Single-Family CRT program has cumulatively transferred a portion of the credit risk on $1.6 trillion in mortgages. As of March 31, 2020, 51% of the Single-Family credit guarantee portfolio was covered by CRT transactions, and conservatorship capital needed for credit risk on this population was reduced by approximately 75 percent through these transactions.
Both Freddie Mac and Fannie Mae reported income losses in Q1 2020.
Freddie Mac's net income was down $1.8 billion from the prior quarter, citing higher credit-related expense of $1.1 billion, or $0.9 billion, after-tax, primarily due to higher expected credit losses as a result of the COVID-19 pandemic. The company also pointed to lower gains on single-family asset disposition activity of $0.6 billion.
"Freddie Mac’s first quarter was marked by unprecedented challenges to our country, our business and our markets—and I am very proud of how we have responded," said David M. Brickman, CEO, Freddie Mac. "We are offering relief to millions of homeowners and renters, supporting our customers in new and vital ways, and serving as a stabilizing force for the housing finance system. Through these efforts, we are continuing to fully serve our mission."