Fannie’s Friday deal is the first risk-share one ever to include a true flow feature – that is, credit-risk counterparties agree to back what the GSE securitizes even before the GSE buys the mortgage.  However, credit-quality conditions in this structure are tight and Fannie retains a first-loss position, reinforcing our view that truly free-flowing, market-priced risk-shares remain a work in progress.

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