November 29, 2017Fannie Mae Completes Final Credit Insurance Risk Transfer Transaction of 2017 on $16 Billion of Single-Family Loans
Latest Fannie Mae CIRT Transaction Transfers Credit Risk on 15-year and 20-Year Mortgages
WASHINGTON, DC – Fannie Mae (FNMA/OTC) today announced that it has completed its ninth Credit Insurance Risk Transfer™ (CIRT™) transaction of 2017 covering existing loans in the company's portfolio. The deal, CIRT 2017-7, which covers $16 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 mortgage market. To date, Fannie Mae has acquired nearly $5.3 billion of insurance coverage on approximately $220 billion of loans through the CIRT program.
"This year we have made great progress in expanding the number of active partners writing our CIRT coverage, and increasing the transparency of our program," said Rob Schaefer, Vice President for Credit Enhancement Strategy & Management, Fannie Mae. "CIRT 2017-7 is our second transaction covering 15-year and 20-year loans, and it attracted a record number of 18 reinsurer participants. As a demonstration of our commitment to transparency, Fannie Mae recently updated our data analytics web tool, Data Dynamics®, to provide additional disclosure on the aggregate loan amount in each CIRT and Connecticut Avenue Security™ (CAS) transaction potentially affected by the 2017 hurricanes, and posted to our website new commentary and analysis discussing the impact of some past hurricanes on credit performance."
With CIRT 2017-7, which became effective October 1, 2017, Fannie Mae will retain risk for the first 25 basis points of loss on a $16.3 billion pool of loans. If the $40.7 million retention layer is exhausted, reinsurers will cover the next 125 basis points of loss on the pool, up to a maximum coverage of approximately $204 million.
Coverage for these deals will be provided based upon actual losses for a term of 7.5 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 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.
The covered loan pools for the two transactions consist of fixed-rate loans with loan-to-value ratios greater than 75 percent and less than or equal to 97 percent, and original terms between 15 and 20 years, inclusive. The loans were acquired by Fannie Mae from January 2016 through March 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 $1.2 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 September 30, 2017, $884 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.