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Perspectives Blog

A Look Back: 10 Years of Credit Risk Transfer

October 19, 2023
Devang Doshi
Devang Doshi

Senior Vice President, Capital Markets - Single-Family Products

Kathleen Pagliaro
Kathleen Pagliaro

Vice President, Credit Risk Transfer

Rob Schaefer
Rob Schaefer

Vice President, Credit Risk Transfer

Ten years ago, Fannie Mae launched its single-family credit risk transfer (CRT) program. Thanks to the dedication and support from our investor, reinsurer, and broker-dealer partners, together we've built a broad and liquid market for U.S. mortgage credit. This market helps protect taxpayers by transferring risk away from Fannie Mae, improves our capital efficiency, provides opportunities for investors and reinsurers to invest in U.S. housing, and ultimately helps to build a stronger and more durable housing finance system.

With a $3.6 trillion single-family guaranty book of business business as of June 30, 2023, Fannie Mae is one of the largest credit risk managers in the mortgage industry. Over the years, we've developed robust policies, underwriting and servicing applications for our lender partners, and analytics for managing that credit risk so that we can continue to serve our housing mission. Not only are these tools important for our borrower, renter, and lender stakeholders, but they're also critical to our investors.

"The valuable partnership we’ve built with an array of investors and reinsurers has been integral to building a broad and liquid market. We're grateful for our deep and diverse CRT community who regularly engages with us to strengthen the programs, which is critical in shaping our strategy and delivering on our mission."  

-Devang Doshi

That's because in 2013, we sought to share mortgage credit risk with investors and reinsurers, facilitating the flow of private capital between Fannie Mae's lender customers and a diverse group of private market participants. Our initial goal was to build the market and expand liquidity, while protecting taxpayers, at a time when the GSEs were not permitted to retain earnings. The success of this program to date, as evidenced by the broad interest from investors and reinsurers, reinforces our confidence in CRT as an important tool for our company, even now as Fannie Mae is able to retain earnings to restore capital.

The Numbers

Through two of our primary CRT programs, Connecticut Avenue Securities® (CAS) and Credit Insurance Risk Transfer (CIRT™), we've:

  • Brought over 125 CAS and CIRT transactions to market.
  • Developed a deep and diverse investor base with participation from over 265 investors and 50 reinsurers.   
  • Transferred over $88 billion of credit risk on over $2.9 trillion of unpaid principal balance (UPB) at issuance as of September 30.
  • Repurchased $7.9 billion UPB of CAS debt across five tender offers.
  • Exercised our early termination option to cancel 36 CIRT transactions prior to their scheduled maturity dates.
  • Published a historical research dataset of over 54 million loans.

Looking Ahead

We recently executed CIRT 2023-9, the last reinsurance transaction of the year, and plan to return to market next month with CAS 2023-R08, a low-LTV transaction, subject to market conditions.

Fannie Mae is focused on transparency, offering accessible web-based resources, like Data Dynamics®, our powerful analytics platform. Tools like this are largely developed based on market feedback, which is also integral in shaping our forward-looking strategy.

We remain committed to CRT and look forward to the continued partnership ahead.