The Federal National Mortgage Association (Fannie Mae) has completed its fourth and fifth Credit Insurance Risk Transfer (CIRT) transactions of 2018, which together provide re/insurance cover for $22 billion of loans.
These latest two deals are a part of Fannie Mae’s ongoing effort to reduce taxpayer risks by increasing the role of private capital in the mortgage market, with the CIRT programme now representing about $6.9 billion of re/insurance coverage on $278 billion of loans.
“These new transactions transferred $663 million of risk to seventeen reinsurers and insurers, representing the largest amount of risk that we have transferred in a single CIRT transaction set. We continue to see strong and growing interest in our CIRT program,” said Rob Schaefer, Vice President for Credit Enhancement Strategy & Management at Fannie Mae.
“Fannie Mae remains committed to increasing liquidity in the risk-sharing market through the regularity and transparency of our credit risk transfer transactions,” he added.
In CIRT 2018-4, Fannie Mae will retain risk for the first 60 basis points of loss on a $19 billion pool of loans, with reinsurers covering the next 300 basis points of loss on the pool if the $116 million retention layer is exhausted, up to a maximum coverage of approximately $580 million.
With CIRT 2018-5, Fannie Mae will retain risk for the first 60 basis points of loss on a $2.7 billion pool of loans, with an insurer covering the next 300 basis points of loss on the pool if this $16.5 million retention is exhausted, up to a maximum coverage of approximately $82.5 million.
Coverage for these deals is provided based upon actual losses for a term of 10 years, although the aggregate coverage amount may be reduced after one year, or cancelled by Fannie Mae at any time for a fee after five years.
The loan pools covered by the two transactions consist of fixed-rate loans acquired by Fannie Mae between October 2017 and March 2018, with original terms between 21 and 30 years and loan-to-value ratios greater than 60% and less than or equal to 80%.
Fannie Mae completed its second and third CIRT deals of 2018 in June, which successfully secured re/insurance cover for an additional $10 billion of single family loans, and the Association expects to continue to come to market with further CIRT and CAS deals that will allow private capital to gain exposure to the U.S housing market.
