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Fannie Mae Completes 2018’s First Credit Insurance Risk Transfer

Fannie mae

Fannie Mae has announced its first completed Credit Insurance Risk Transfer [1] (CIRT) transaction of 2018, consisting of nearly $17 billion in single-family loans from the Enterprise’s portfolio. Entitled CIRT 2018-1, the transaction “is a part of Fannie Mae’s ongoing effort to reduce taxpayer risk by increasing the role of private capital in the mortgage market,” according to a Fannie statement [2].

Through the CIRT program, Fannie Mae [3] reports that the Enterprise has acquired nearly $5.8 billion of insurance coverage on approximately $240.8 billion of loans.

"Our CIRT transactions continue to reduce credit risk for Fannie Mae while bringing private capital to the housing market," said Rob Schaefer, VP for Credit Enhancement Strategy and Management, Fannie Mae. "We are pleased that this form of risk transfer has been well received by the market and, based on the indicated support by the reinsurers, we intend to bring similar transactions to the market in the future."

CIRT 2018-1 became effective on February 1, 2018. Fannie Mae will retain risk for the first 50 basis points of loss on the $16.9 billion pool of loans. According to Fannie’s statement, “If the $84.4 million retention layer is exhausted, reinsurers will cover the next 275 basis points of loss on the pool, up to a maximum coverage of approximately $464.1 million.”

The covered pool of loans for CIRT 2018-1 include “fixed-rate loans with loan-to-value ratios greater than 60 percent and less than or equal to 80 percent, and original terms between 21 and 30 years, inclusive.” Fannie acquired the loans between January 2017 and September 2017. You can see pricing and other details for the transaction by clicking here [4].

For more insights into Fannie Mae’s Credit Insurance Risk Transfers, click here [5] to read an exclusive DS News interview with Fannie Mae’s Rob Schaefer.