For the last three years, the GSEs have engaged in a number of credit risk sharing transactions in order to transfer more of the risk on the loans it guarantees to private investors. Most of those transactions have been of the back-end variety, meaning the credit risk is transferred on loans that are already on the books of Fannie Mae and Freddie Mac.
On Wednesday, the GSEs' conservator, the FHFA, issued a Single-Family Credit Risk Transfer Request for Input for their ongoing analysis of front-end credit risk transfer transactions, in which the credit risk is transferred to a third party at the time the loan is originated—prior to the GSEs’ acquisition of the underlying mortgage. The RFI seeks feedback from stakeholders on proposals to adopt more front-end structures and other credit risk transfer policy issues.
The Federal Reserve did not object to the capital plans of 30 out of 33 bank holding companies tested as part of the Fed’s Comprehensive Capital Analysis and Review, according to an announcement from the Fed on Wednesday afternoon. While the Fed did not object to Morgan Stanley’s capital plan, the central bank is requiring the firm to submit a new plan by December 29, 2016, in order to address weaknesses found in its capital planning process.