Credit risk transfer (CRT) is changing the way the U.S. residential housing market is funded — and we're leading the way. As of today, our Single–Family business has transferred credit risk on more than $1 trillion in mortgages. We're proud of this milestone, which is creating a better housing finance system for homebuyers, investors and taxpayers.
Here are the 3 main benefits of credit risk transfer:
Shifts credit risk away from taxpayers. This is clearly the biggest benefit. In the past, Freddie Mac transferred the interest rate risk, but retained the credit risk associated with the mortgages we purchased. Today, we're also transferring a significant portion of the mortgage credit risk to private investors. Since we started our credit risk transfer program in 2013, about 40% of our $1.8 trillion single–family portfolio has some type of CRT coverage.
Creates new opportunities for investors. Our growing and evolving credit risk transfer program enables us to reach an expanding and diverse investor base, many of which have not historically invested in agency single–family mortgage credit risk. We now have more than 220 unique investors, including money managers, alternate investment funds, insurance and reinsurance companies and real estate investment trusts (REITs). A bigger pool of investors also means we are able to disperse risk more widely.
Strengthens the mortgage market. In addition to shielding taxpayers from losses, our strong risk management approach underlying this evolving funding model also helps to build a more robust system that can keep overall mortgage rates low for America's borrowers and lower costs for investors. In addition, it's more flexible and better able to weather dynamic market and economic conditions.
Learn more about how CRT works and how we're transforming the industry.
Freddie Mac's transformation continued in the second quarter, with good business results
and strong financial performance, providing the foundation to effectively deliver
upon our mission and improve America's housing finance system.
We can all remember the great sense of accomplishment felt after achieving a personal
goal. For many people, that rush of joy and emotion was felt when they bought a home
for the first time. Think about it. The path to homeownership is typically a multi-year
process that involves a committed savings plan, a close look at your financial situation
and a determined search for the perfect home that fits your needs and budget. Only
after rounds negotiations, inspections and paperwork, do you finally get handed the
keys to the front door.
When it comes to big data and how companies use it in their internal operations, one
phrase comes to mind: 'vocational irony.' While it may be obscure, it's meaning is
so common that it's become cliche in narrative fiction. The barefoot children of a
cobbler. The broke accountant. The lovesick relationship expert. Or, more aptly, the
technology company that provides cutting edge financial models for their customers
while their internal machinery remains firmly rooted in the 20th century.