Freddie Mac believes the market for credit-risk transfers may never return to pre-COVID levels because of the potential impact of the pandemic on mortgage performance.

A 91% drop in GSE earnings during 1Q has raised concerns about their second-quarter performance and exit from conservatorship.

The GSEs’ loan performance data excludes various loan types, such as ARMs and low-documentation loans, that performed poorly in the financial crisis. Nearly half of the GSE loans originated in 2006 and 2007 are expurgated from the data provided to CRT investors.

Because it controls the senior class of stock in Fannie and Freddie, the Treasury is in the driver’s seat on recap and release. Former Freddie CEO Layton weighs the government’s options, using AIG as a blueprint.