Rounds, Flood Applaud Administration’s Support for Credit Risk Transfer

WASHINGTON – U.S. Senator Mike Rounds (R-S.D.), Chairman of the Senate Banking Subcommittee on Securities, Insurance, and Investment, and U.S. Representative Mike Flood (R-Neb.), Chairman of the House Financial Services Subcommittee on Housing and Insurance, sent a bicameral letter to Federal Housing Finance Agency (FHFA) Director William Pulte commending his commitment to credit risk transfer (CRT) programs at Fannie Mae and Freddie Mac and encouraging him to continue to support polices that leverage private capital to promote safety and soundness.

“Housing affordability and system stability are top priorities for Americans today. De-concentrating mortgage credit risk away from the government to willing private sector participants through CRT can promote both of those goals. CRT has and continues to hold great potential in helping to right-size the role the Enterprises play in our housing finance system,” the members wrote. “President Trump has directed federal agencies to lower housing costs and expand supply—goals that align directly with an improved Enterprise CRT program. As you chart FHFA’s course, we encourage you to support policies that leverage private capital and market discipline to promote safety, soundness, and liquidity through all economic cycles.”

Since 2013, CRT has played a central role in shifting mortgage credit risk from the federal government to private investors, transferring $210 billion of risk across more than $6.7 trillion in mortgages. This letter builds on Senator Rounds’ longstanding support for the strategic use of CRT programs to safeguard taxpayers. He previously raised the importance of CRT during Director Pulte’s confirmation hearing in February, highlighting it as a key tool.

Read the full text of the letter HERE or below.

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Dear Director Pulte,

Congratulations on your new role as Director of the Federal Housing Finance Agency (FHFA). We appreciated your clear support for credit risk transfer (CRT) programs at Fannie Mae and Freddie Mac during your recent testimony before the Senate Banking Committee. Your identification of CRT as “very important” and your commitment to continued work on it signal a step in the right direction for taxpayers and the broader housing finance system.

As we work to strengthen and modernize our housing finance framework, it is critical that the Enterprises operate on a foundation of financial discipline and stability. That means reducing taxpayer exposure, encouraging market oversight and maintaining affordable mortgage access for families across the country.

CRT can provide a valuable risk management tool that supports Enterprise safety and soundness through economic cycles. Since 2013, FHFA has required and incentivized CRT use, resulting in new private-sector approaches to risk analysis, price discovery and market discipline that would not have otherwise been achieved. Enterprise CRT programs use two distinct markets to transfer risk to private capital, with both investors and reinsurers underwriting and pricing Enterprise credit risk. Overall, between 2013 and 2023, the Enterprises transferred $210 billion of risk on approximately $6.7 trillion of single-family mortgage unpaid principal balance, according to FHFA.

FHFA’s CRT program marked a critical shift from the pre-financial crisis model, where excessive mortgage risk was concentrated in highly leveraged Enterprises with little transparency or incentive to limit risk. CRT distributes risk across a broad base of private investors and reinsurers who, with real financial stakes, are incentivized to monitor Enterprise risk-taking and react appropriately when risks increase. This creates a pricing feedback loop that helps the Enterprises accurately price risk, reducing the likelihood of housing bubbles and the serious consequences that follow.

Housing affordability and system stability are top priorities for Americans today. De-concentrating mortgage credit risk away from the government to willing private sector participants through CRT can promote both of those goals. CRT has and continues to hold great potential in helping to right-size the role the Enterprises play in our housing finance system. By strengthening and improving how Fannie Mae and Freddie Mac use CRT we can advance a market-driven approach to housing finance reform—broadening mortgage access, reinforcing market stability, and protecting taxpayers from lending risks.

President Trump has directed federal agencies to lower housing costs and expand supply—goals that align directly with an improved Enterprise CRT program. As you chart FHFA’s course, we encourage you to support policies that leverage private capital and market discipline to promote safety, soundness, and liquidity through all economic cycles.

We appreciate your attention to this critical issue and look forward to working with you to keep CRT a cornerstone of a strong, stable, and private capital-supported housing finance system.

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