November 06, 2019Fannie Mae Executes a Credit Insurance Risk Transfer Transaction on $10.5 Billion of 30-year Single-Family Loans
Program Continues to Demonstrate Market Leadership and Reduce Taxpayer Risk
WASHINGTON, DC – Fannie Mae (FNMA/OTCQB) announced today that it has completed its seventh Credit Insurance Risk Transfer™ (CIRT™) transaction of 2019, covering loans previously acquired by the company. The deal, CIRT 2019-4, covers $10.5 billion in unpaid principal balance of 21-year to 30-year original term fixed rate loans, as 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 committed to acquire approximately $10.3 billion of insurance coverage on $386 billion of single-family loans through the CIRT program, measured at the time of issuance for both post-acquisition (bulk) and front-end transactions.
"As the CIRT program continues to grow and evolve, Fannie Mae remains committed to increasing liquidity in the risk-sharing market through the regularity and transparency of our credit risk transfer transactions," said Rob Schaefer, Vice President for Credit Enhancement Strategy & Management at Fannie Mae. "We are proud to be the leading manager of single-family residential credit risk in the industry, and to have taken a leading role in partnering with private sources of capital in transferring mortgage credit risk, building a market that barely existed even five years ago."
With CIRT 2019-4, which became effective September 1, 2019, Fannie Mae will retain risk for the first 40 basis points of loss on a $10.5 billion pool of single-family loans with loan-to-value ratios greater than 80 percent and less than or equal to 97 percent. If the $42 million retention layer is exhausted, fifteen insurers and reinsurers will cover the next 375 basis points of loss on the pool, up to a maximum coverage of approximately $392 million.
Coverage for these deals is provided based upon actual losses for a term of 12.5 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 month thereafter. The coverage on each deal 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 pool for the CIRT 2019-4 consists of fixed-rate loans that were acquired by Fannie Mae from December 2018 through June 2019. 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 an unpaid principal balance close to $1.9 trillion, which includes the full contract amount for front-end CIRT transactions, measured at the time of transaction, through its credit risk transfer efforts, including CIRT, Connecticut Avenue Securities™ (CAS), and other forms of risk transfer. As of September 30, 2019, $1.2 trillion in outstanding unpaid principal balance of loans in our single-family conventional guaranty book of business were included in a reference pool for a credit risk transfer transaction. Depending on market conditions and other factors, 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.