WASHINGTON A bipartisan group of Senate Banking Committee members is urging the Federal Housing Finance Agency to make risk-sharing a higher priority for Fannie Mae and Freddie Mac.
In a letter to the agency, six senators urge Director Mel Watt to develop and release a five-year timeline aimed at advancing the current risk-sharing program. That plan should include metrics and annual goals for the risk-sharing program that passes some of the credit risk to private investors and reduces the loss exposure of the government-sponsored enterprises, the letter said.
"This timeline should include the projected percentage of enterprise unpaid principal balance covered under the credit risk transfer program in each year; the projected percentage of annual new business subject to first loss and front-end risk sharing, including the projected depth of first loss risk sharing per type of transaction; and a granular assessment of the completed credit risk transfers that details metrics which measure the relative success or failure of each pilot," the letter says.
Sens. Mark Warner, D-Va.; Bob Corker, R-Tenn.; Heidi Heitkamp, D-N.D.; Mike Crapo, R-Idaho; Jon Tester, D-Mont.; and Dean Heller, R-Nev.; signed the letter.
In the House, Rep. Edward Royce, R-Calif., has urged the FHFA to work toward using risk-sharing on all GSE mortgage securitizations.
"Loss sharing could go deeper and deeper as we go from 3% to 4% to 5%" of the unpaid principal balance of the securitized mortgage pool, Royce said June 3 at a housing finance event sponsored by the National Journal.
The FHFA and the GSEs have been experimenting with risk sharing deals for two years. Industry support for risk-sharing transaction appears to be widespread. But small lenders are concerned that some deals might be geared toward the large banks that can structure their own transactions, leaving small lenders shut out.
"We want the FHFA to conduct these risk-sharing transactions in a way that ensures broad and equitable access to all lenders," said Scott Olson, executive director of the Community Home Lenders Association.