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Exception Tracking Spreadsheet (TicklerTrax™)
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Credit risk transfers report published

The Federal Housing Finance Agency has announced the publication of a report on the performance of Fannie Mae's and Freddie Mac's (the Enterprises) single-family credit risk transfers (CRTs). The report focuses on securities issuance and insurance/reinsurance credit risk sharing vehicles, which account for about 90 percent of all CRT issuance to date.

CRTs remain untested by a serious loss event. With the prospect of potential future losses at the onset of COVID-19, some investors suggested that their willingness to continue to invest in CRTs was contingent on the Enterprises' amending or suspending certain contractual provisions of early fixed-severity securities issuances. The Enterprises affirmed that COVID-related forbearance mortgages would be treated as specified in the contracts and disclosures.

The report identifies several areas beyond its scope that are in need of research and analysis to inform the future direction of the CRT programs: (1) more accurate measurement of the amount of credit risk transferred via CRTs over time, as well as CRT-related costs and benefits; (2) the Enterprises' exposure to counterparty risk through insurance/reinsurance CRTs and the costs, benefits, and potential risks of the Enterprises' approaches to mitigate counterparty risk; (3) the efficacy of, and potential costs and benefits of innovations to, certain features of CRT structures; and (4) the value of the information about credit risk that has been and can be derived from CRT pricing.

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