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Housing Markets & Conditions

Demystifying GSE Credit Risk Transfer: Part II - How, and How Well, Does It Work?

Author: Don Layton | February 03, 2020

Credit risk transfer (CRT) has become, in relatively quick order, a core component of the business model of the two Government-Sponsored Enterprises (GSEs), Freddie Mac and Fannie Mae, and very substantially improves that business model. In this paper, Don Layton explains how CRT works....

Demystifying GSE Credit Risk Transfer: Part I – What Problems Are We Trying to Solve?

Author: Don Layton | January 21, 2020

The credit risk transfer (CRT) was pioneered by Freddie Mac in 2013 as a way of reducing systemic risk, as well as the degree of taxpayer exposure to GSE risk. Though it has played an increasingly important role in both GSEs’ operations, it is still not widely understood. In the first of three papers on this subject, Don Layton explains how CRT works, as well as the benefits it provides. ...

Treasury’s Long GSE Capital To-Do List: Clearing the Decks for Investors

Author: Don Layton | December 19, 2019

As 2019 ends, the two Government-Sponsored Enterprises (GSEs) Freddie Mac and Fannie Mae finally have some momentum in ending their conservatorships, the legal status under which they have operated essentially as wards of the US Government for over eleven years now. For the exit from conservatorship to take place administratively, the big agenda item still to be addressed is capital – in the broadest context, covering a lengthy list of topics....

A Case Study of GSE Politicization: The Flawed Narrative of Loose Credit

Author: Don Layton | December 12, 2019

A significant feature of America’s residential mortgage system is its heavy politicization. This case study is about one long-running, specific aspect of that politicization: the advocacy-based narratives about the credit quality of the mortgages financed by the two government-sponsored enterprises (GSEs) Freddie Mac and Fannie Mae....

After a Decade of Debate about the Right GSE Reform Model, We’re Down to Two Choices

Author: Don Layton | October 15, 2019

The housing finance policy community had thrown around all sorts of ideas about how to move forward after the two GSEs were placed in conservatorship in the 2008 Financial Crisis. In the early years of conservatorship, while many of these ideas were being developed and discussed, all of them looked to replace the two GSEs....

A Missing Piece of the Administrative Reform Puzzle: How the GSEs Generate Cross-Subsidies

Authors: Michael Stegman, Richard Cooperstein | October 09, 2019

With the passing of the eleventh anniversary of GSE conservatorship and the release of the administration’s long-awaited housing finance reform plans, longstanding disagreements over the appropriate affordable housing obligations of Fannie Mae and Freddie Mac show no sign of abatement. Given that prospects for legislative reform are bleak, stakeholders have turned their collective attention to administrative reform, wondering what action Mark Calabria, the director of the FHFA, will take....