Credit Risk Sharing

Credit Risk Sharing

Creating new markets for credit risk

In recent years, we have moved away from being a company that only acquires and holds mortgage credit risk. Instead, we distribute much of that risk through our credit risk transfer transactions – facilitating the flow of private capital between Fannie Mae's 1,200 lenders and a diverse group of investors.

As the largest credit risk manager in the industry, we have built comprehensive processes and tools that help us acquire high-quality loans, prevent defaults, and reduce losses. Fannie Mae is proud to be the market leader in single-family residential mortgage credit risk management. And now, by developing a suite of credit risk-sharing initiatives, we offer opportunities for financial institutions to invest in the credit performance of our single-family book of business.

Credit Risk Transfer - What is it?

Learn about the old versus new models


Credit risk-sharing isn’t new at Fannie Mae, but it has evolved dramatically since the financial crisis. In just over two years, we have created a new market for credit risk transfers, bolstered by our innovative, industry-leading credit risk management resources. 

Credit risk-sharing goals and benefits

Through our leading credit risk management approach and unparalleled transparency to the market, we act as an intermediary between lenders and investors by setting standards, providing credit risk management oversight, and maintaining stability through business cycles. Our goal is to develop broad and liquid markets for credit risk that reduce taxpayer risk, minimize the impact to borrowers and lenders, offer an attractive investment option for investors in mortgage credit, and help to build a stronger housing finance system.

Our suite of credit risk-sharing vehicles

To support the demand for mortgage credit in the market, we have developed multiple innovative forms of risk-sharing with private market participants and created a market for securitized mortgage credit risk. Our programs include:

Connecticut Avenue Securities

Our Connecticut Avenue Securities (CAS) program was launched in 2013 and created a new market for investing in mortgage credit risk. CAS deals are designed to share credit risk on a portion of our strongest performing single-family book – newly originated, qualifying mortgage loans that are underwritten using strong credit standards and enhanced risk controls (implemented post-housing crisis). CAS credit-linked debt notes offer ongoing, programmatic issuance and consistent structures. Multiple dealers make daily secondary markets in CAS and provide research coverage and analytical tools. Loan-level data disclosures and an extensive historical dataset are available to support deal analysis.
Learn more about the program

Credit Insurance Risk Transfer

Credit Insurance Risk Transfer (CIRT) is a key risk-sharing vehicle that complements the CAS program. CIRT deals transfer a portion of the credit risk on a pool of loans to an insurance provider who then transfers that risk to one or more reinsurers. The reinsurance market is a significant and attractive source of private capital because it currently bears a small amount of U.S. residential mortgage risk and its other forms of risk are not correlated to Fannie Mae to any meaningful degree.
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Lender Front-End Risk-Sharing

Fannie Mae’s lender-facing upfront risk transfer transactions are another way that Fannie Mae transfers credit risk on the loans we acquire. These arrangements allow a lender to invest directly in credit risk by retaining a portion of the credit risk on loans they originate and/or service.

Mortgage Insurance Risk-Sharing

We have a long-standing practice of sharing risk with mortgage insurance companies. Fannie Mae publishes more information about transactions in which we purchase credit enhancements from mortgage insurance companies in order to transfer risk to private sources of capital.
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Our commitment to the future

Credit risk-sharing with the private markets via our risk-sharing vehicles is a fundamental part of the business at Fannie Mae today, and CRT is the new normal for the mortgage markets.

Driven by industry-leading innovations in credit risk management, Fannie Mae works to continue to build a liquid market through consistent and programmatic issuance of its various credit risk sharing products. By creating a suite of risk-sharing vehicles in the market, we aim to accomplish our overall goals of:

  • protecting taxpayers
  • minimizing the impact on borrowers and lenders
  • improving market efficiency
  • creating liquidity

Achieving these goals will enable Fannie Mae to continue to provide reliable, large-scale access to affordable mortgage credit.

Learn more

Learn about our industry-leading approach to credit risk management.

Learn more about our credit performance data and analytics tools.

Sign up to receive Fannie Mae's Credit Risk Transfer commentary and news via email, using the link below.

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