GSEs

Conforming loan limits for mortgages bought by Fannie Mae and Freddie Mac will increase for the second consecutive year in response to the rapid rise in home prices, the Federal Housing Finance Agency said.

The FHFA is allowing Fannie Mae and Freddie Mac to invest in the credits for the first time since they entered conservatorship. Its purpose is to promote affordable housing in underserved markets.

Mark Calabria, the chief economic adviser to Vice President Mike Pence, said the administration is focused for now on more pressing issues than GSE reform, including addressing housing damage from recent hurricanes.

Called Structured Agency Credit Risk Securitized Participation Interests, the new securities are backed by mortgage loans, and are not general obligations of the government-sponsored enterprise.

Many of the prime jumbo loans backing the transaction, JP Morgan 2017-4, were contributed by originators with limited history in that product, according to DBRS.

Mortgage investors want Freddie Mac to align its policy with Fannie Mae's when it comes to how delinquencies related to Hurricane Harvey affect credit risk transfer deals.

The portfolio of conforming loans is currently being subserviced by Nationstar Mortgage Holdings on behalf of Seneca Mortgage Investments.

Fannie Mae and Freddie Mac will adjust their risk-sharing deals so that they can accommodate high loan-to-value loans refinanced under the programs replacing the Home Affordable Refinance Program.

Credit risk transfers have emerged as more than just a method for mitigating taxpayer exposure. They could be a key component of comprehensive housing finance reform.

The government-sponsored enterprise is still looking for the right balance between offering a product that's attractive to investors and a cost-effective way to reduce risk.