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Fannie Mae executes two front-end credit risk transfer deals

11th July 2019 - Author: Luke Gallin

U.S. government-sponsored enterprise (GSE), Fannie Mae, has successfully completed two new front-end credit risk transfer deals. Combined, the deals protect up to $14 billion of loans to be acquired by Fannie Mae between May 2019 through April 2020, and transfer up to $455 million of credit risk on the loans.

mortgage-imageThe latest deals, CIRT FE 2019-1 and CIRT FE 2019-2, are part of the company’s ongoing efforts to lower taxpayer risk by increasing the role of the private markets in the mortgage world. So far, Fannie Mae has committed to acquire roughly $9.3 billion of insurance protection on $359 billion of single-family loans through the CIRT programme.

Rob Schaefer, Vice President for Credit Enhancement Strategy & Management, Fannie Mae, said: “Nineteen insurers and reinsurers participated on these two front-end CIRT transactions, providing Fannie Mae the certainty of forward coverage on loans that we will acquire over a 12-month period.

“We are proud to be a leader in building and supporting the market for transferring single-family mortgage credit risk to private sources of capital.”

Both the coverage and pricing of the latest two deals are for 12 months, and with CIRT FE 2019-1, Fannie Mae will retain risk for the first 50bps of loss on an approximately $8 billion pool of single-family loans. If the retention is exhausted, reinsurers will cover the next 325bps of loss on the pool, up to a maximum of $260 million.

With the second deal, Fannie Mae will retain risk for the first 50bps of loss on an approximately $6 billion pool of single-family loans. If the retention is exhausted, reinsurers will cover the next 325bps of loss on the pool, up to a maximum of $195 million.

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