Fannie Mae Completes First Credit Insurance Risk Transfer Transaction of 2018 on over $11 Billion of Multifamily Loans
WASHINGTON, DC – For more than 30 years, Fannie Mae (FNMA/OTC) has been a market leader in transferring risk to the private sector. Today, Fannie Mae announced that it has completed an additional risk transfer deal – its first Credit Insurance Risk Transfer™ (CIRT™) transaction of 2018 covering existing multifamily loans in the company's portfolio. Fannie Mae expects multifamily CIRT transactions to be a programmatic offering going forward. This deal, CIRT 2018-M01, which covers approximately $11.1 billion of loans, is a part of Fannie Mae's ongoing effort to reduce taxpayer risk by increasing the role of private capital in the multifamily mortgage market.
"This innovative CIRT transaction helps reduce credit risk for Fannie Mae while bringing additional private capital to the multifamily housing market," said Jonathan Gross, Vice President, Multifamily, Fannie Mae. "Our Delegated Underwriting and Servicing (DUS®) lenders share about one-third of the credit risk on our multifamily loans and this transaction helps us mitigate risk on the other two-thirds of credit risk, benefitting the U.S. taxpayer."
"This new transaction transferred $166 million of risk to seven reinsurers and insurers, representing the largest amount of credit risk we have transferred in a multifamily CIRT transaction," said Gross. "We continue to see strong and growing interest in our multifamily CIRT program."
The covered loan pool for the transaction consists of 1,106 loans for 1,111 multifamily properties acquired by Fannie Mae from October 2017 through January 2018. Each loan has an unpaid principal balance of $30 million or less.
With CIRT 2018-M01, which became effective August 23, 2018, Fannie Mae will retain risk on the first 225 basis points of loss on the $11.1 billion covered pool of loans. Reinsurers will cover the next 150 basis points of loss. Once the pool has experienced 375 basis points of losses, the credit protection will be exhausted and Fannie Mae will be responsible for any further losses.
Since 2016, in addition to the risk transferred to its DUS lending partners, Fannie Mae has transferred a portion of the credit risk on multifamily mortgages with unpaid principal balance of more than $28.5 billion, through its CIRT program.
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.