December 16, 2019Fannie Mae Executes Final Credit Insurance Risk Transfer Transaction of 2019 on $18.5 Billion of 15-year and 20-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 eighth and final Credit Insurance Risk Transfer™ (CIRT™).
"With twenty-one insurers and reinsurers providing coverage, demand for this transaction was again among the strongest we've ever had," said Rob Schaefer, Vice President for Credit Enhancement Strategy & Management at Fannie Mae. "With CIRT 2019-5, we expanded our coverage of 15- and 20-year fixed rate loans, relative to prior CIRT deals that covered similar product, by including loans with lower loan to value ratios. Additionally, we increased our risk transfer, relative to those prior deals, by extending the deal term from 7.5 years to 9 years and reducing our first loss retention layer to 15 basis points. We appreciate the support of our reinsurer partners as they help us enhance and expand our CIRT program."
With CIRT 2019-5, which became effective October 1, 2019, Fannie Mae will retain risk for the first 15 basis points of loss on a $18.5 billion pool of single-family loans with loan-to-value ratios greater than 70 percent and less than or equal to 97 percent. If the $27.8 million retention layer is exhausted, twenty-one insurers and reinsurers will cover the next 130 basis points of loss on the pool, up to a maximum coverage of approximately $241 million.
Coverage for these deals is provided based upon actual losses for a term of 9 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 four-year anniversary of the effective date by paying a cancellation fee.
The covered loan pool for the CIRT 2019-5 consists of fixed-rate loans that were acquired by Fannie Mae from June 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 $2.0 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.