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The Handbook of Mortgage-Backed Securities7th Edition$
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Frank J. Fabozzi

Print publication date: 2016

Print ISBN-13: 9780198785774

Published to Oxford Scholarship Online: October 2016

DOI: 10.1093/acprof:oso/9780198785774.001.0001

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GSE Credit Risk Transfer Deals

GSE Credit Risk Transfer Deals

(p.235) Chapter 10 GSE Credit Risk Transfer Deals
The Handbook of Mortgage-Backed Securities

Debra Chen

Oxford University Press

This chapter analyzes the government-sponsored enterprise (GSE) credit risk transfer (CRT) deals of Fannie Mae and Freddie Mac, part of the Federal Housing Finance Agency’s (FHFA) initiative to bring private capital back to the mortgage market after the global financial crisis. Credit risk transfer bonds are unsecured obligations of the GSEs and the cash flows of credit risk transfer bonds are linked to the performance of the reference mortgage pools. The deal structure of the CRT is different from traditional non-agency residential mortgage-based securities (RMBS) due to the default definition and a fixed severity schedule. The collateral for credit risk transfer bonds consists of 30-year amortizing fixed-rate loans that originated post crisis with the loan-to-value ratios falling in a certain range. Freddie Mac’s risk transfer shelf is Structured Agency Credit Risk (STACR), while Fannie Mae’s is Connecticut Avenue Securities (CAS).

Keywords:   government-sponsored enterprise, GSE, credit risk transfer, CRT, Fannie Mae, Freddie Mac, Federal Housing Finance Agency, mortgage market, Structured Agency Credit Risk, Connecticut Avenue Securities

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