SFIG Submits Comment Letters to FHFA on Credit Risk Transfer Strategies

On October 13, 2016, in response to the Federal Housing Finance Agency’s (FHFA) Request for Information (RFI) on Fannie Mae and Freddie Mac’s (GSEs’) Credit Risk Transfer (CRT) strategies, SFIG submitted its own comment letter and participated in the submission of a joint trade comment letter with other organizations, including the American Bankers Association, the Association of Mortgage Investors, the Housing Policy Council of the Financial Services Roundtable, the Mortgage Bankers Association, and the Securities Industry and Financial Markets Association.

SFIG’s CRT RFI response includes language supportive of CRT transactions in general while arguing that reinvigorating the PLS market should remain an important priority for both the FHFA and the broader housing finance industry. The letter also reiterates SFIG’s previously stated position that the best approaches to safely foster PLS issuance are to: a) decrease the conforming loan limits and b) set guarantee fees to reflect the credit risk associated with a mortgage guarantee and the cost of appropriately capitalizing the GSEs given their systemic importance.

The joint trade letter, which is publicly available on the FHFA’s website, calls for the “continued refinement and experimentation” in terms of how the GSEs conduct credit risk transfers, that lenders need a “level playing field” to avoid skewing underlying credit risk, and that the market needs “visibility into the economics of various forms of CRT for the GSEs”.

Please contact Daniel.Goodwin@sfindustry.org for questions regarding SFIG’s response to the FHFA. If you are interested in joining SFIG’s GSE Reform Subcommittee, please contact Marshall.Bornemann@sfindustry.org.

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