Last year the Federal Housing Finance Agency (FHFA)—Fannie Mae’s and Freddie Mac’s regulator—announced a streamlined version of the federal government’s popular Home Affordable Refinance Program (HARP). The streamlined program will expand HARP eligibility to include mortgages originated on or after October 1, 2017.
Last month I highlighted the role of the front-end insurance risk share process around Credit Risk Transfer (CRT). I reviewed what the front-end risk share model is in the current state and noted the expanded efforts underway to broaden the pool of MI’s and reinsurers as counterparties t
o expand the front-end offerings. This is in addition to the already successful back-end CRT which has found great success thus far. So, the key question for 2017 is what does CRT look like in a post housing reform environment where much of the capital at risk is not the government credit guarantee but is comprised of private capital?
The FHFA issued an RFI to solicit feedback from stakeholders on proposals from the GSEs to adopt additional front-end credit risk transfer structures and to consider additional credit risk transfer policy issues. There is firm interest in this new and growing execution for risk transfer by investors who have confidence in the underwriting and servicing of mortgage loans through new and improved GSE standards.
As we look forward to 2017 and the critical issues facing the nation’s housing finance system, one of the paramount matters will be the ongoing development of the Credit Risk Transfer (CRT) initiative.