Lawmakers Push to Expand Credit Risk Transfer Programs at Fannie Mae and Freddie Mac
Bipartisan momentum is building behind an initiative to shift more mortgage credit risk from taxpayers to private investors. This week, Senator Mike Rounds, Chair of the Senate Banking Subcommittee on Securities, Insurance, and Investment, and Representative Mike Flood, Chair of the House Financial Services Subcommittee on Housing and Insurance, issued a joint letter to Federal Housing Finance Agency (FHFA) Director William Pulte endorsing stronger support for credit risk transfer (CRT) programs operated by Fannie Mae and Freddie Mac.
In their letter, the two lawmakers applauded the FHFA’s ongoing commitment to CRT, a market mechanism designed to reduce the government’s financial exposure by partnering with private-sector investors. These risk-sharing strategies, they argued, play a vital role in stabilizing the housing market and protecting taxpayer dollars especially during times of economic uncertainty.
“With housing affordability under pressure and economic conditions evolving rapidly, we believe CRT programs can be pivotal in aligning risk with those best positioned to bear it,” the letter read. “President Trump’s directive to lower housing costs and grow supply is consistent with expanding CRT, which supports safer and more market-driven housing finance.”
A Decade of Progress in Shifting Mortgage Risk
CRT was launched in 2012 as part of the post-crisis effort to insulate taxpayers from future losses tied to mortgage defaults. Under FHFA supervision, both Fannie Mae and Freddie Mac developed structured CRT instruments, including Fannie’s Connecticut Avenue Securities (CAS) and Credit Insurance Risk Transfer (CIRT), and Freddie’s Structured Agency Credit Risk (STACR) and Agency Credit Insurance Structure (ACIS).
These programs have since become core components of the GSEs’ risk management playbook. As of 2025, more than $210 billion in mortgage risk tied to $6.7 trillion in loans has been transferred to private investors. The programs work by issuing bonds or securing reinsurance contracts, which absorb potential credit losses in exchange for premium payments.
Why It Matters: Taxpayer Protection and Market Discipline
Former Freddie Mac CEO Donald Layton who now serves as a senior fellow at Harvard’s Joint Center for Housing Studies outlined the purpose of CRT in a 2020 report. Layton identified five core problems CRT aims to solve:
- Reducing systemic risk across the housing finance sector
- Minimizing taxpayer exposure to mortgage defaults
- Introducing greater market accountability into GSE operations
- Lowering the cost of capital at the Enterprises
- Enabling more competitive guarantee fees, without direct subsidies
CRT, according to Layton and other experts, has succeeded on all five fronts. By shifting risk to willing investors, the GSEs can operate more like private companies while still fulfilling their public mission.
Support Growing in Congress
Sen. Rounds and Rep. Flood’s letter marks another step in a growing legislative effort to institutionalize CRT as a permanent fixture of federal housing finance. Their message to Director Pulte: don’t just preserve CRT expand it.
“It’s essential that our housing finance system rests on a foundation of financial discipline and long-term resilience,” the letter states. “Private capital has an important role to play in absorbing risk. Strengthening CRT programs will increase housing access, enhance market liquidity, and shield taxpayers from future bailouts.”
The lawmakers also underscored the potential of CRT to encourage innovation in risk management and improve the GSEs’ ability to weather future downturns.
A Market-Driven Approach to Reform
At a time when housing affordability and availability are at the forefront of national concern, CRT offers a scalable way to balance public responsibilities with private market efficiency. Instead of increasing government liabilities, CRT allows for a more agile, diversified approach to managing credit risk.
The FHFA’s support of these initiatives under Director Pulte is seen by many as a step toward modernizing the housing finance system one that complements the broader goal of reducing reliance on taxpayer-funded bailouts.
As housing policy continues to take center stage in Washington, CRT is emerging as a rare area of bipartisan agreement. Both sides appear to agree that in a world of rising mortgage costs and complex market dynamics, sharing risk with private investors may be one of the safest bets taxpayers can make.
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