The Federal National Mortgage Association (Fannie Mae) has completed another multi-tranche Credit Insurance Risk Transfer (CIRT) transaction, which provides re/insurance cover for a pool of $11.7 billion of multifamily loans.
The new transaction, called MCIRT 2019-01, is the fifth CIRT transaction as part of Fannie Mae’s ongoing effort to increase the role of private capital in the multifamily mortgage market and mitigate risk for U.S. taxpayers.
In December 2018, the Association secured re/insurance cover for $10.9 billion of multifamily loans in its first multi-tranche CIRT deal.
“We are happy to introduce our first multifamily credit risk sharing transaction of 2019,” said Jonathan Gross, Vice President, Multifamily at Fannie Mae. “Further innovation and reinsurer interest allowed us to bring to market our first three-tranche offering.”
“This new transaction transferred $332 million of risk to reinsurers and insurers, making it the largest single transfer of risk for our multifamily CIRT program,” he explained. “Depending on market conditions, we plan to return later this year with additional multifamily CIRT transactions.”
The covered loan pool for the transaction consists of 1,155 loans acquired by Fannie Mae from July 2018 through October 2018. Each loan has an unpaid principal balance of $30 million or less.
MCIRT 2019-01, which became effect from February 1, 2019, will see Fannie Mae retain risk on the first 75 basis points of losses on the reference pool.
The C tranche C tranche will transfer risk to reinsurers covering losses between 75 basis points and 150 basis points, Fannie Mae explained, while the B tranche will transfer risk for losses between 150 and 275 basis points and the A tranche for between 275 and 400 basis points.
Once the pool has experienced 400 basis points of losses, the credit protection will be exhausted and Fannie Mae will be responsible for any further losses.
Since 2016, Fannie Mae has transferred a portion of the credit risk on multifamily mortgages with an aggregate unpaid principal balance of more than $51 billion through its CIRT program.