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New bill would force GSEs to make more credit-risk transfers

U.S. Reps. Ed Royce, R-Calif., and Gwen Moore, D-Wis., introduced legislation that would require the Federal Housing Finance Agency to establish guidelines for Fannie Mae and Freddie Mac to engage in significant and increasing credit risk transfer transactions.

H.R. 6487, the Taxpayer Protections and Market Access for Mortgage Finance Act, includes changes to commodities rules that allow the use of credit-linked notes to transfer risk from the government-sponsored enterprises to the private sector. It also amends existing securities and tax laws to allow real estate investment trusts to invest in GSE credit risk bonds.

Further, the legislation establishes two pilot programs to increase risk sharing transactions with small lenders and mortgage insurers.

Royce and Moore are senior members of the House Financial Services Committee.