FHFA Continues to Push Fannie, Freddie on Credit-Risk Sharing


WASHINGTON — A regulatory 2017 scorecard for Fannie Mae and Freddie Mac calls on the firms to transfer a significant portion of credit risk to third-party private investors on at least 90% of unpaid principal balance of newly acquired single-family mortgages.

The Federal Housing Finance Agency is also encouraging the government-sponsored enterprises to transfer a meaningful chunk of credit risk on at least 80% of new multifamily loans.

The scorecard, released by agency on Thursday, is part of its ongoing push to require the government-sponsored enterprises to engage in risk-sharing deals.

“FHFA expects the enterprises to continue single-family and multifamily credit risk transfers as core business practices,” the agency said in the scorecard. “FHFA will adjust targets as necessary to reflect market conditions and economic considerations.”

The GSEs have come a long way since they first began embracing credit sharing deals. In 2014, the FHFA pushed the GSEs to issue at least $90 billion in securities with credit risk attributes.

Overall, Fannie has issued $622 billion in credit risk transfer deals while Freddie has issued $589 billion in such deals since mid-2013.

The scorecard outlines the goals that FHFA sets for Fannie and Freddie as they move into their eighth year of conservatorship.

“The goals and initiatives contemplated in the scorecard strike what we believe is an appropriate balance between ensuring that these entities operate in a safe and sound manner while continuing to ensure that the housing finance market remains liquid and supports housing access for homeowners and renters,” said FHFA Director Mel Watt in a press release.

Additionally, the scorecard calls on Fannie and Freddie to “conclude their assessment of updated credit score models for underwriting, pricing and investor disclosures, and, as appropriate, plan for implementation.”

In September, Fannie Mae updated its automated underwriting machine to process trended data for the first time.

Trended data, which allows underwriters a deeper dive into a consumer’s credit history, has been used by the credit card and other finance companies for many years. But it has not yet been widely adopted by the mortgage industry.

The scorecard also encourages the GSEs to implement a post-crisis loss mitigation program in 2017 for borrowers with long-term hardships.

FHHA also wants the enterprises to “develop other post-crisis loss mitigation options for borrowers, with short-term hardships and guidelines for foreclosure alternatives such as short sale and deed-in-lieu” transactions.

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