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62 | TH E M R EP O RT SECONDARY MARKET THE LATEST O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T Aging Population Brings Unique Housing Challenges Freddie Mac is working to address the housing needs of today's growing senior population with an increase in senior home financing. T he United States Cen- sus Bureau reported that in 2029, more than 20 percent of the total U.S. population will be over the age of 65—thus Freddie Mac has made it part of its mission to address the impending issue of senior housing. The aging baby boomer popula - tion is going to cause a doubling of individuals between 65 and 74 by 2030—from 21.7 million in 2010 to 38.6 million, according to Harvard's Joint Center for Housing Studies. This becomes problematic because seniors' fixed- income and health care needs require affordable options and specialized facilities. Freddie Mac focuses on rental as a way to help this aging popu - lation through independent living, assisted living, and memory care. The National Association of Home Builders reported that many home builders are designing homes with boomers in mind. "As a person ages, there is a likelihood that use of a wheel - chair might become a necessity," the report said. "Designing a home that is livable now but can transition and be functional as the occupant ages is important in ensuring that the home will be a good long-term investment." Another issue is that boomers don't want to move from their houses, furthering the inven - tory problem many metros are experiencing. MReport previously reported that 53 percent of U.S. owner-occupied housing is currently taken up by individu - als aged 55 and older, which is up from 43 percent since 2007. Millennials from 18 to 34 only make up 11 percent of the share. To put that in perspective, baby boomers inhabited almost double that amount when they were in the 18 to 34 bracket. Freddie Mac said it is doing its part to increase the amount of se - nior living, financing more senior housing last year than it ever has. "We are committed to helping accommodate the rising demand of this very important market—to ensure our nation's seniors can age in comfort, dignity, and hap - piness," Freddie Mac stated. Credit Risk Transfers Help Keep G-fees in Line. SVP of Credit Risk Transfer at Freddie Mac explains how CRTs provide insight into G-fees. I n a Freddie Mac Perspectives blog post, Kevin Palmer, SVP of Single-Family Credit Risk Transfer, explained how credit risk transfers (CRTs) and guarantee fees (G-fees) have much more in common that one might think— one gives Freddie Mac significant insight into the other. Guarantee fees are a retained amount of payments received on mortgages sold to Freddie Mac by banks and other sellers. In return, Freddie guarantees payment of principal and interest on the pass- through securities it issues to its customers, or Gold PCs. "The G-fee essentially covers the cost of providing the credit guaran - tee—both the non-credit costs, such as administrative costs, and credit costs, which are the expected costs plus the cost of unexpected losses," Palmer said. Though the G-fee normally would be for costs Freddie Mac could incur if it retained all the credit risk related to loans in its mortgage securities, over the last four years it has been transferring a significant portion to the private market through its Single- Family CRT program. What CRT does for G-fees is clarify to Freddie that the G-fees are in line with what the private market would charge for the mortgage credit risk it takes. To calculate the G-fee, Freddie analyzes the cost of the past years structured agency credit risk (STACR) transactions and deter - mines the market-implied G-fee for the lower range of what the private sector would be willing to pay to operate a credit guarantee business like Freddie Mac's. According to Palmer, "CRT is not only shifting risk away from taxpayers and creating new asset classes for investors, it is a key benchmark for policy discussions by providing information about what the private capital markets would charge for absorbing the credit risk generated by the credit guarantee business of a GSE."

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