The Federal National Mortgage Association (Fannie Mae) has completed its sixth and seventh Credit Insurance Risk Transfer (CIRT) transactions of 2018, which together provide re/insurance cover for $9 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 program now representing about $7.3 billion of re/insurance coverage on $291 billion of loans.
“These new transactions transferred $271 million of risk to fourteen reinsurers and insurers. 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.”
In CIRT 2018-6, Fannie Mae retains risk for the first 60 basis points of loss on a $7.9 billion pool of loans, with reinsurers covering the next 300 basis points If the $47 million retention layer is exhausted, up to a maximum coverage of approximately $237 million.
With CIRT 2018-7, Fannie Mae retains risk for the first 60 basis points of loss on a $1.1 billion pool of loans, with an insurer covering the next 300 basis points of loss on the pool If the $6.8 million retention layer is exhausted, up to a maximum coverage of approximately $33.9 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 at the one-year anniversary and each month thereafter.
The coverage may be cancelled by Fannie Mae at any time on or after the five-year anniversary of the effective date by paying a cancellation fee.
The covered loan pools for the two transactions consist of fixed-rate loans with loan-to-value ratios greater than 80% and less than or equal to 97% and original terms between 21 and 30 years.
