Since 2014, the Federal Housing Finance Agency (FHFA) has required the GSEs to engage in credit risk transfer (CRT) transactions as part of their annual scorecard requirements. During that time, Fannie Mae and Freddie Mac (GSEs) have sold $22B of credit risk to the capital markets on a total unpaid principal balance of single family of $643B

In 2018, the FHFA released a proposed capital rule for the Enterprises. Under that proposal, the GSEs receive substantial capital relief for CRT transactions, recognizing the contractual transfer of risk away from the GSEs to private investors. However, banks and other private financial institutions do not receive any capital relief for engaging in similar CRT transactions. The unequal capital treatment results in higher costs, less efficient business operations, and a significant competitive disadvantage for private sector participants relative to the GSEs.

The Structured Finance Association is working to create a level playing field where all participants receive equitable capital treatment for similarly structured risk transactions.

This involves educating policymakers and—where appropriate—advocating for changes or clarifications to in significant risk transfer transactions. Such steps will ultimately benefit consumers as more private capital will be available to provide access to credit.