Fannie Mae CEO pushes for more credit-risk sharing in bond market

Good news for the private markets

The profit of Fannie Mae may be half that of the previous quarter, but the CEO still sees ample room to grow.

Fannie Mae recorded a third-quarter 2015 net income of $2 billion and comprehensive income of $2.2 billion.

The government-sponsored enterprise also reported a positive net worth of $4 billion as of Sept. 30, 2015, resulting in a dividend obligation to the Department of the Treasury of $2.2 billion, which the company expects to pay in December 2015.

CEO Timothy Mayopoulos said the suite of credit-risk sharing products on offer for the government-sponsored enterprise is going to continue to grow.

“We will continue to distribute credit risk into the private market using a whole suite of products,” he said in a call to HousingWire. “We’re tapping a different pool of private capital.

“We created a brand new market in a short time, and investors responded very well and we’ll keep growing in a steady way,” he added. “We will build a large, deep pool of liquidity.”

Fannie Mae issues bonds collateralized by mortgages. As part of its conservatorship agreement with the federal government, the GSE must shrink exposure to the taxpayer. One way is shifting that risk into the hands of private investors.

Fannie has increased the role of private capital in the mortgage market and reduced taxpayer risk through its Connecticut Avenue Securities and Credit Insurance Risk Transfer transactions.

Since October 2013, these transactions have transferred to the private market a significant portion of the credit risk on single-family mortgage loans with an unpaid principal balance of approximately $464 billion.

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