When a loan is sold under the Fannie Mae DUS program, the Company typically agrees to guarantee a portion of the ultimate loss incurred on the loan should the borrower fail to perform. The compensation for this risk is a component of the servicing fee on the loan. The guaranty is in force while the loan is outstanding. The Company does not provide a guaranty for any other loan product it sells or brokers. Activity related to the guaranty obligation for the three and nine months ended September 30, 2020 and 2019 is presented in the following table:

Activity related to the allowance for risk-sharing obligations for the three and nine months ended September 30, 2020 and 2019 is shown in the following table:

On January 1, 2020, the Company recognized the CECL transition adjustment based on its assessment of the multifamily market and the macroeconomic environment at that time and concluded that the projections for the coming year were for continued strong performance similar to the performance over the past few years. The Company’s losses have been de minimis over the past few years. Considering that the Company’s historical loss rate consisted of both strong and weak multifamily and macroeconomic periods, the Company concluded it was appropriate to adjust the loss rate downward for the forecast period. The charge-off rate applied for the forecast period in the WARM CECL calculation was one basis point, which approximated the average of the actual loss rate for the past two years as these conditions were expected to prevail over the course of the forecast period. The Company reverted to the actual historical loss rate of two basis points for all remaining years in the calculation.

Conditions changed significantly beginning in March 2020 due to the Crisis across the world and the resulting global social distancing, lockdown, and phased reopening measures that were put in place by national/state/local authorities with varying expected longevities. These actions reversed macroeconomic conditions from sustained strength to global economic contraction, causing unemployment rates to rise sharply and a recession to ensue.

These conditions have impacted, and are expected to continue to impact, unemployment rates and consumer incomes which are expected to have an adverse impact on multifamily occupancy rates and property cash flows in the near term, increasing the likelihood of delinquencies, loan defaults, and risk-sharing losses. The Company believes that the potential impacts due to the Crisis are expected to be generally consistent with the great financial crisis of 2007-2010. However, the Company expects the Crisis will impact the multifamily market over a one-year period instead of a two-year period and result in less severe losses over the shortened time frame. The charge-off rate during the great financial crisis of 2007-2010 (the “last recession”) totaled 12 basis points over the two-year period. The Company adjusted the charge-off rate down to seven basis points to reflect the current expected economic and operating environment based on the following:

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The DSCR of the Company’s current at-risk servicing portfolio is substantially higher than it was immediately prior to the last recession,

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The fair values of the properties collateralizing the at-risk servicing portfolio are higher than they were immediately prior to the last recession, and

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The positive impacts of the unprecedented level of economic stimulus from the federal government during the initial stages of the Crisis.

The charge-off rate of seven basis points was used for the forecast period as of June 30, 2020 and September 30, 2020, with a reversion to the historical weighted-average charge-off rate of two basis points for all remaining years in the calculation.

The calculated CECL reserve for the Company’s $41.0 billion at-risk Fannie Mae servicing portfolio as of September 30, 2020 was $63.6 million compared to $34.7 million as of the CECL adoption date on January 1, 2020. The significant increase in the CECL reserve was principally related to the forecasted impacts of the Crisis. The weighted-average remaining life of the at-risk Fannie Mae servicing portfolio as of September 30, 2020 was 7.7 years.

Two loans that defaulted in 2019 have aggregate specific reserves of $6.9 million as of September 30, 2020. The properties related to these two loans were both off-campus student living facilities in the same city. The Company does not have any additional at-risk loans related to student living facilities in this city.

As of September 30, 2020, the maximum quantifiable contingent liability associated with the Company’s guarantees under the Fannie Mae DUS agreement was $8.5 billion. The maximum quantifiable contingent liability is not representative of the actual loss the Company would incur. The Company would be liable for this amount only if all of the loans it services for Fannie Mae, for which the Company retains some risk of loss, were to default and all of the collateral underlying these loans were determined to be without value at the time of settlement.