The Federal National Mortgage Association (Fannie Mae) has completed its first multi-tranche Multifamily Credit Insurance Risk Transfer (MCIRT) transaction of 2020, covering a pool of $8.7 billion of multifamily loans.
The deal marks the eight Multifamily CIRT transaction undertaken by Fannie Mae as part of its efforts to increase the role of private capital in the multifamily mortgage market.
“Fannie Mae’s first multifamily credit risk sharing transaction of the year transferred approximately $283 million of risk to reinsurers and insurers,” said Jonathan Gross, Vice President, Multifamily, Fannie Mae.
“With this Multifamily CIRT transaction, we are commencing regular programmatic issuance and we expect to be in the market with one transaction in each quarter,” he added.
Fannie Mae’s MCIRT program shares risk with reinsurer and insurer counterparties and supplements the its Delegated Underwriting and Servicing (DUS) program/
Since 2016, in addition to the risk retained by its DUS lender partners, Fannie Mae has transferred more than $80.6 billion of credit risk on multifamily mortgages through its MCIRT program.
The loan pool covered by this latest deal consists of 1,017 loans acquired by Fannie Mae from July 2019 through September 2019.
Under the terms of the transaction, Fannie Mae will retain risk on the first 75 basis points of losses on the reference pool, after which the C tranche will transfer risk to reinsurers covering losses between 75 basis points and 150 basis points.
The B tranche will then transfer risk to reinsurers covering losses between 150 and 275 basis points, and the A tranche will transfer risk to reinsurers covering losses 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.
