The Federal National Mortgage Association (Fannie Mae) has completed its sixth Credit Insurance Risk Transfer (CIRT) transaction of 2019, securing $14.8 billion of reinsurance on 30-year single-family loans.
The deal forms 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 billion of insurance coverage on $375 billion of single-family loans through the CIRT program.
This latest deal marked the first time a 30-year bulk CIRT transaction was structured with an extended policy term of 12.5 years and a 40 basis point retention layer, compared to a 10-year policy term and a retention layer of between 50 and 60 basis points for similar past deals.
“With twenty-one insurers and reinsurers providing coverage, demand for this transaction was among the strongest we’ve ever had,” said Rob Schaefer, Vice President for Credit Enhancement Strategy & Management, Fannie Mae.
“With this deal, the CIRT program reached an important milestone, having committed approximately $10 billion of risk transfer since the program’s first transaction in 2014,” Schaefer continued.
“The successful growth and evolution of CIRT is founded on a partnership between Fannie Mae and participating insurers and reinsurers, reinforced by the transparency of the CIRT program and our leadership in managing single-family residential credit risk.”
With CIRT 2019-3, Fannie Mae will retain risk for the first 40 basis points of loss on a $14.8 billion pool of single-family loans with loan-to-value ratios greater than 60% and less than or equal to 80%.
If the $59 million retention layer is exhausted, reinsurers will cover the next 325 basis points of loss on the pool, up to a maximum coverage of approximately $479 million.
Since 2013, Fannie Mae has transferred a portion of the credit risk on single-family mortgages with an unpaid principal balance of over $1.8 trillion.
