Fannie Mae Completes First Credit Insurance Risk Transfer Transaction of 2018 on $16.9 Billion of Single-Family Loans
WASHINGTON, DC – Fannie Mae (FNMA/OTC) today announced that it has completed its first Credit Insurance Risk Transfer™ (CIRT™) transaction of 2018 covering existing loans in the company’s portfolio. The deal, CIRT 2018-1, which covers $16.9 billion of single-family loans, is a part of Fannie Mae’s ongoing effort to reduce taxpayer risk by increasing the role of private capital in the mortgage market. To date, Fannie Mae has acquired nearly $5.8 billion of insurance coverage on approximately $240.8 billion of loans through the CIRT program.
"Our CIRT transactions continue to reduce credit risk for Fannie Mae while bringing private capital to the housing market," said Rob Schaefer, Vice President for Credit Enhancement Strategy & Management, Fannie Mae. "We are pleased that this form of risk transfer has been well received by the market and, based on the indicated support by the reinsurers, we intend to bring similar transactions to the market in the future."
With CIRT 2018-1, which became effective February 1, 2018, Fannie Mae will retain risk for the first 50 basis points of loss on a $16.9 billion pool of loans. If the $84.4 million retention layer is exhausted, reinsurers will cover the next 275 basis points of loss on the pool, up to a maximum coverage of approximately $464.1 million.
Coverage for these deals will be provided based upon actual losses for a term of 10 years. Depending on 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 one-year anniversary and each month thereafter. The coverage may be canceled by Fannie Mae at any time on or after the five-year anniversary of the effective date by paying a cancellation fee.
The covered loan pools for the transaction consist of fixed-rate loans with loan-to-value ratios greater than 60 percent and less than or equal to 80 percent, and original terms between 21 and 30 years, inclusive. The loans were acquired by Fannie Mae from January 2017 through September 2017. A summary of key deal terms, including pricing, for these new and past CIRT transactions can be found at https://www.fanniemae.com/resources/file/credit-risk/pdf/cirt-deal-pricing-information.pdf.
Since 2013, Fannie Mae has transferred a portion of the credit risk on single-family mortgages with unpaid principal balance of more than $1.3 trillion, measured at the time of transaction (including the full contract amount for front-end CIRT transactions), through its credit risk transfer efforts, including CIRT, Connecticut Avenue Securities™ (CAS), and other forms of risk transfer. As of December 31, 2017, $922 billion in outstanding unpaid principal balance of loans in the company’s single-family conventional guaranty book of business were included in a reference pool for a credit risk transfer transaction. Depending on market conditions, Fannie Mae expects to continue coming to market with CIRT and CAS 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.Fannie Mae helps make the 30-year fixed-rate mortgage and affordable rental housing possible for millions of Americans. We partner with lenders to create housing opportunities for families across the country. We are driving positive changes in housing finance to make the home buying process easier, while reducing costs and risk. To learn more, visit fanniemae.com and follow us on twitter.com/FannieMae.