Fannie Mae Completes its Latest Credit Insurance Risk Transfer Transaction of 2016

For the First Time, Fannie Mae's CIRT Transaction Uses 15-year and 20-year Mortgages in Loan Pool

Pete Bakel

202-752-2034

WASHINGTON, DC – Fannie Mae (FNMA/OTC) announced today that it has completed its 10^th Credit Insurance Risk Transfer^™ (CIRT^™) transaction of 2016. This deal, CIRT 2016-9, worth $11.7 billion, is part of an ongoing effort to reduce taxpayer risk by increasing the role of private capital in the mortgage market. For the first time since the program’s inception, the covered loan pool consists of 15-year and 20-year fixed rate mortgages and will allow the company to offer reinsurers a more diversified investment opportunity. To date, Fannie Mae has acquired more than $3 billion of insurance coverage on over $124 billion of loans through the CIRT program.

“With CIRT 2016-9, we identified a new segment of loans for which risk sharing was economical and that proved attractive to our risk-sharing reinsurer partners,” said Rob Schaefer, vice president for credit enhancement strategy & management, Fannie Mae. “By including 15-year and 20-year loans in the transaction, Fannie Mae has expanded the scope of our credit risk transfer programs that help shift risk away from the company, reduce taxpayer risk, and help create a safer, stronger housing finance system.”

In CIRT-2016-9, which became effective October 1, 2016, Fannie Mae retains risk for the first 35 basis points of loss on an $11.7 billion pool of loans. If this $41 million retention layer were exhausted, reinsurers would cover the next 175 basis points of loss on the pool, up to a maximum coverage of approximately $205 million.

Coverage for these deals is provided based upon actual losses for a term of 7.5 years. Depending upon the paydown of the insured pool and the principal amount of insured loans that become seriously delinquent, the aggregate coverage amount may be reduced at the two-year anniversary and each anniversary of the effective date thereafter. The coverage may be canceled by Fannie Mae at any time on or after the four-year anniversary of the effective date by paying a cancellation fee.

In 2017, depending on market conditions, Fannie Mae expects to continue coming to market with CIRT and Connecticut Avenue Securities^™ deals that allow private capital to gain exposure to the U.S. housing market.

More information on Fannie Mae’s credit risk transfer activities is available at https://www.fanniemae.com/portal/funding-the-market/credit-risk/index.html.