FHFA yesterday issued its latest risk-share report, looking at the first quarter’s numbers — underwhelming for so entrenched a program – even as the agency reiterated its confidence that risk-shares are working. Our assessment suggests that this is true only if one is satisfied with first-loss GSE positions, subsidized pricing, and unimpressive volumes. If this is how good risk-sharing gets, it’s hard to see how markets can be induced to step in well and truly ahead of a catastrophic backstop absent major shifts in market pricing.
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