MSCI Agency Credit Risk Transfer (CRT) Models
categories: general, YU Yihai, Risk Management, Factor and Risk Modeling, Risk Management Analytics
The Credit Risk Transfer (CRT) programs from Fannie Mae and Freddie Mac aim to shift mortgage credit risk from the Enterprises to private investors, with cumulatively $2.8 trillion loans covered so far. To facilitate these capital market transactions since 2013, the Enterprises have disclosed about 20 years of monthly credit performance data on almost 50 million loans, with a detailed voluntary prepayment history, delinquency and foreclosure status data, as well as an actual loss breakdown. This paper focuses on the model insight extracted from this rich dataset and provides details of the MSCI CRT model.