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Freddie Mac Transfers $2.5B in Credit Risk

Freddie Mac’s Single-Family business recently announced that its Credit Risk Transfer (CRT) program transferred approximately $2.5 billion of credit risk on $69 billion of single-family mortgages from U.S. taxpayers to the private sector in the third quarter of 2019. This brings the year-to-date total of credit risk transferred to $7.3 billion on $196 billion of single-family mortgages.

“Freddie Mac is committed to the stability of the U.S. housing finance system, and CRT is a key component,” said Mike Reynolds, VP, Credit Risk Transfer. “We will continue to offer attractive opportunities for private capital to participate in our program as we expand CRT coverage across our book of business.”

Freddie Mac issued a total of six STACR and ACIS transactions in the third quarter—three on-the-run deals (DNA and HQA) and three seasoned deals (ARMR and FTR). As a result of STACR and ACIS on the run transactions this quarter, Freddie Mac transferred between 80% (high LTV HQA series) and 90% (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 $51 billion in credit risk on nearly $1.4 trillion in mortgages.

Freddie Mac posted a $1.7 Billion net income for Q3 2019. According to the GSEs, these incomes represent yet another step toward adding the capital necessary to move toward private ownership.

“In the third quarter, Freddie Mac took an important first step toward exiting conservatorship by adding more than $1.8 billion to our total equity, bringing our capital reserve to $6.7 billion,” said David M. Brickman, Freddie Mac CEO. “As we look to the future, we are squarely focused on serving our mission and meeting the milestones necessary to move the company forward.”

Freddie Mac reports that conservatorship capital reduced by $5.2 billion from the prior year, due in part to credit risk transfer (CRT) activity, home price appreciation, legacy asset dispositions, and a decrease in deferred tax assets.

About Author: Seth Welborn

Seth Welborn is a Reporter for DS News and MReport. A graduate of Harding University, he has covered numerous topics across the real estate and default servicing industries. Additionally, he has written B2B marketing copy for Dallas-based companies such as AT&T. An East Texas Native, he also works part-time as a photographer.
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