Perceived flaws in the current and proposed GSE credit-risk transfers are explored in a recent blog posting by Tim Howard, former Fannie Mae executive. He said that the GSE CRTs are too expensive and Fannie has too much first-loss exposure in its Connecticut Avenue Securities structure before it takes effect. Howard also said that because the risk-transfer tranches can prepay and amortize over time, they most likely won’t be outstanding long enough to absorb many of the losses that exceed the first-loss limit. As an example, Howard pointed to Fannie’s CAS prospectus, which shows no losses transferred to investors in more than 60 different scenarios of combined credit loss and prepayment rates...