Fannie Mae Completes Multi-Tranche Credit Insurance Risk Transfer Transaction on Approximately $8.7B of MF Loans
WASHINGTON, DC – March 6, 2020 – Fannie Mae (FNMA/OTCQB) announced today that it has completed its first multi-tranche Multifamily Credit Insurance Risk Transfer (MCIRT™) transaction of 2020 covering a pool of approximately $8.7 billion of existing multifamily loans in the company's portfolio. This new transaction, MCIRT 2020-01, is the eighth Multifamily CIRT transaction as part of Fannie Mae's ongoing efforts to increase the role of private capital in the multifamily mortgage market.
"Fannie Mae's first multifamily credit risk sharing transaction of the year transferred approximately $283 million of risk to reinsurers and insurers," said Jonathan Gross, Vice President, Multifamily, Fannie Mae. "With this Multifamily CIRT transaction, we are commencing regular programmatic issuance and we expect to be in the market with one transaction in each quarter."
The covered loan pool for the transaction consists of 1,017 loans acquired by Fannie Mae from July 2019 through September 2019. These loans are secured by 1,019 properties. Each loan has an unpaid principal balance of less than $30 million.
With MCIRT 2020-01, which became effective February 1, 2020, Fannie Mae will retain risk on the first 75 basis points of losses on the reference pool. The C tranche will transfer risk to reinsurers covering losses between 75 basis points and 150 basis points. The B tranche will transfer risk to reinsurers covering losses between 150 and 275 basis points. The A tranche will transfer risk to reinsurers covering losses between 275 and 400 basis points. Once the pool has experienced 400 basis points of losses, the credit protection will be exhausted and Fannie Mae will be responsible for any further losses.
Fannie Mae's MCIRT program shares risk with diversified reinsurer and insurer counterparties. It supplements the company's Delegated Underwriting and Servicing (DUS®) program where originating lenders routinely share approximately one-third of the credit risk on multifamily loans.
Since 2016, in addition to the risk retained by our DUS lender partners, Fannie Mae has transferred a portion of its credit risk on multifamily mortgages with an aggregate unpaid principal balance of more than $80.6 billion through our MCIRT program.
Fannie Mae continues to bring transparency to the market with its new Multifamily CRT website, where investors can find the company's Multifamily Loan Performance Dataset and information about its Multifamily Credit Risk Management structure.
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.
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