Institutional investors have yet to shy away from nonbank debt deals, which is good news for mortgage bankers tapping the capital markets.

In late 2020, Fannie came back into credit-risk transfers with a bespoke deal with one of its largest nonbank sellers. Freddie continued full speed ahead with more traditional STACR issuance. (Includes data chart.)

Due to COVID-related forbearances, Freddie faced a $2.2 billion increase in its provisions for losses in 2020. However, that expense was more than offset by an across the board increase in revenues.

The latest transaction is an actual loss deal issued through a trust; previous Multifamily Structured Credit Risk deals were structured as fixed-severity deals issued as corporate debt.

The deal bears many of the characteristics of previous front-end credit-risk transfer deals that PennyMac entered into with Fannie Mae.

Whether its warehouse borrowing or debt restructuring, the capital markets remain a favorable place to be for nonbank lender/servicers.

The FHFA’s capital requirements include relatively harsh treatment of credit-risk transfer transactions from Fannie and Freddie but that view could change under the Biden administration.

Fannie’s new REMIC election for its multifamily MBS will not change their basic structure. The asset will remain as a single-class pass-through security is-sued through a trust agreement.

The FHFA went from allowing 18.0% capital reduction for CRT under the re-proposed rule to less than 17.1% under the final version. That means the answer may be “ no.”

The two GSEs agree that a proposed capital rule would diminish the benefit of credit-risk transfers, but Freddie plans to stay in the market under the current regime. (Includes data chart.)