Fannie Mae Completes Tenth Credit Insurance Risk Transfer Transaction to Date

Callie Dosberg

202-752-3117

WASHINGTON, DC – Fannie Mae (FNMA/OTC) announced today that it has completed its latest Credit Insurance Risk Transfer^™ (CIRT^™) transaction, the tenth deal since the program's inception in 2013. This deal, CIRT 2016-3, shifts a portion of the credit risk on a pool of single-family loans with an unpaid principal balance (UPB) of approximately $5.7 billion to a single insurer. The covered loan pool consists of 30-year fixed rate loans with loan-to-value (LTV) ratios greater than 60 percent and less than or equal to 80 percent. The loans were acquired by Fannie Mae from May 2015 through June 2015. Through CIRT and Fannie Mae's other credit risk transfer programs, the company is successfully reducing taxpayer risk by increasing the role of private capital in the mortgage market.

“We continue to see strong interest from insurers and reinsurers in our CIRT program and look forward to pursuing additional opportunities to transfer risk to these parties in the future,” said Rob Schaefer, vice president for credit enhancement strategy & management, Fannie Mae. “Fannie Mae remains committed to leading efforts to bring private capital into the housing market.”

In this transaction, which became effective March 1, 2016, Fannie Mae retains risk for the first 50 basis points of loss on a $5.7 billion pool of loans. If this $28.5 million retention layer were exhausted, the insurer would cover the next 250 basis points of loss on the pool, up to a maximum coverage of approximately $142.3 million. Coverage is provided based upon actual losses for a term of 10 years. Depending upon the pay down of the insured pool and the amount of insured loans that become seriously delinquent, the aggregate coverage amount may be reduced at the 3-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 5-year anniversary of the effective date by paying a cancellation fee. 

Since 2013, Fannie Mae has transferred a portion of the credit risk on $634 billion in single-family mortgages through its credit risk transfer efforts, including CIRT, Connecticut Avenue Securities^™ ("CAS") and other forms of risk transfer. 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.