As we most recently said earlier this week, we long expected that pricing for risk via CRT structures would not survive periods of market stress, especially when many CRT counterparties are themselves procyclical ventures thriving on market dislocations without the capital and liquidity resources or business-model construct to ensure continuing credit-absorption capacity. Freddie Mac’s quarterly report today concludes based on hard 1Q experience that continued CRT viability is up in the air due to the sudden departure of longstanding CRT counterparties and, for those left standing, unacceptable pricing. In the near term, these CRT challenges combined with other counterparty risks, put still more capital pressure on Fannie and Freddie’s balance sheets.
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