CRTs help GSEs diversify risk without market disruptions

Credit risk transfers (CRTs) as implemented in government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac provide benefits to taxpayers and the market.

As outlined in a letter to the House Financial Services Subcommittee on Housing and Insurance, America’s Credit Unions supports the important role that CRTs play in ensuring a stable secondary housing market.  CRTs allow the GSEs to shift a portion of mortgage credit risk to private investors, reducing the federal government’s exposure to mortgage credit risk without disrupting the liquidity or stability of secondary mortgage markets.

America’s Credit Unions shared these comments Tuesday in advance of the subcommittee’s  hearing on CRTs and reinsurance.

“Severe stress events are not unfamiliar to the housing market and can undo all the work that has been done to secure the safety and soundness of the GSEs. CRT programs continue to prove resilience and stability in times of economic hardship,” the letter reads, pointing to strong use following COVID-related economic shocks, with higher volume than before the pandemic for Freddie Mac alone.

Read the full letter