Freddie Mac returned to market in July with a $425 million ACIS deal and $1.1 billion STACR, leading GSE watchers to conclude the CRT market has returned from the dead. Others are not so sure.
After Sept. 15, Fannie Mae and Freddie Mac will no longer accept LIBOR loan applications. Moreover, the FHFA and the GSEs expect all loan purchases linked to the London benchmark to cease by yearend.
According to former Fannie Mae CFO Tim Howard, the re-proposed capital requirements are almost 40 times the average of that indicated by stress tests conducted on the GSEs last year.
Borrowers now have the option of simply deferring any forborne payments to the end of their mortgage. In effect, this would work like an interest-free second mortgage, and would become due when the house is sold or the loan is refinanced.
Mortgage servicers’ liquidity issues could ease if non-agency lending is acceptable collateral under the TALF programs, according to Urban Institute’s Jim Parrott.
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.
It’s becoming increasingly clear that unless Fannie or Freddie comes to the rescue of investors, certain pre-2015 CRT deals will sustain losses as millions of borrowers accept mortgage forbearance plans.
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