Credit Risk Transfer and De Facto GSE Reform

Through credit risk transfer (CRT) programs run by Fannie Mae and Freddie Mac, private-sector investors have assumed a portion of the credit risk on roughly $1.8 trillion of mortgages. David Finkelstein, Andreas Strzodka and James Vickery explain how these CRT programs have reduced the exposure of GSEs to mortgage credit risk without disrupting liquidity or stability.