Cracks in CRT
Continuing its assessment of mortgage risk, Brookings has now released a paper evaluating credit
risk transfers. Confusing the way the bank leverage ratio (LR) functions, the paper proposes risk
transfers equal to five percent so that the GSEs are presumably protected from credit risk. Lower gfees
are also proposed on grounds that what the markets demand in CRT pricing establishes an
appropriate risk premium.

GSE-060618.pdf