NEW YORK--(BUSINESS WIRE)--Link to Fitch Ratings' Report: U.S. GSE Risk-Sharing Trends
One year after GSE risk-sharing deals were introduced to the market, delinquencies and defaults remain immaterial, according to Fitch Ratings in its latest GSE risk-sharing trends report.
Additionally, loan repurchases due to issues identified through GSE quality control reviews have outnumbered non-performing credit events by more than two-to-one. All but one of the loans repurchased were performing at the time of the repurchase.
'Though repurchases are outpacing credit event defaults, both figures are still extremely low as a percentage of the total amount of the loans in GSE risk-sharing transactions securitized so far,' said Managing Director Grant Bailey.
The early repurchase activity reflects the upfront quality control reviews both Fannie Mae and Freddie Mac perform on a sample of loans post-acquisition. 'The GSEs typically initiate the upfront reviews within six months of acquisition so repurchase activity of performing loans will be primarily concentrated early in the transaction's life,' said Bailey.
To date, only one of the 41 nonperforming loans that experienced a credit event has been repurchased, although it is possible reviews are still pending for some of the loans. Transaction documents do not obligate the GSEs to review 100% of loans with credit events for underwriting defects. That said, Fitch expects the GSEs to target a high percentage of those loans for review, particularly for credit events within three years of acquisition.
Fitch's quarterly report tracks the performance of the risk-sharing transactions issued by the GSEs and provides a summary of the bond and collateral performance. 'U.S. GSE Risk-Sharing Trends' is available at www.fitchratings.com or by clicking on the above link.
Additional information is available at www.fitchratings.com.