Fitch Ratings today released its analysis of historical mortgage loan-level credit performance data to help investors looking into the upcoming “credit-sensitive” securitization proposals by Freddie Mac.

Fitch said that the analysis uncovered several notable credit trends, most obviously an improvement in credit quality in recent vintages.

“Similar to what we’ve observed in the private market, post-crisis GSE originated loans have recorded strong performance to date,” said managing director Rui Pereira. “The recent performance reflects both better credit quality and improved underwriting controls.”

Freddie Mac released the pool-level and loan-level data on Friday; in doing so, it moved a step closer to fulfilling the Federal Housing Finance Agency directive to execute various risk transfer transactions aimed at reducing the its footprint in housing finance. 

Freddie Mac and sister agency Fannie Mae were supposed to have completed one experimental deal by last September. While they missed that deadline, Bloomberg reported last week that Freddie Mac was  marketing a new structure.  Freddie Mac did not return a call requesting comment.

“The GSEs have been trying to find a way to sell credit risk for some time now,” said one market source familiar with the structure. “The problem is that they can’t do it the traditional way because they risk hurting the TBA market; a very important market that has provided a lot of liquidity, allowed bank originators, especially the smaller players, to be funded right away,” said this person.

Pass-through securities issued by Freddie Mac, Fannie Mae and Ginnie Mae trade in the to-be-issued [TBA] market. A deal with a traditional senior/subordinatie structurel, similar to those issued by Redwood Trust, would mean that the triple-A security is no longer a pass-through security where interest and principal payments in a MBS is paid back every month, explained the market source.


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