The Federal National Mortgage Association (Fannie Mae) has completed its eighth and final Credit Insurance Risk Transfer (CIRT) deal of 2019, securing re/insurance on $18.5 billion of single-family loans.
The transaction, which relates to 15-year and 20-year original term fixed rate loans, 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 $10.6 billion of insurance coverage on $404.6 billion of single-family loans through the CIRT program.
“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,” he explained.
“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.”
Under the terms of the latest CIRT deal, 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, and 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.
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 through its credit risk transfer efforts, including CIRT, Connecticut Avenue Securities™ (CAS), and other forms of risk transfer.
