Fannie Mae has announced that it has executed a new Credit Insurance Risk Transfer (CIRT) transaction. According to the GSE, the covered loans are delivered to Fannie Mae with a short-term, lender repurchase obligation, provided primarily by state Housing Finance Agencies (HFAs), which serves as the initial loan credit enhancement.
The CIRT transaction provides front-end coverage of loans to be delivered to Fannie Mae over a forward 12-month period plus bulk coverage of existing loans, together insuring up to $1.75 billion of high loan-to-value ratios. As part of Fannie Mae’s ongoing effort to reduce taxpayer risk by increasing the role of private capital in the mortgage market, the GSE has committed to acquire about $9.4 billion of insurance coverage on $360 billion of single-family loans through the CIRT program to date.
“This deal pioneered new ground as our first CIRT transaction to cover a targeted pool of single-family affordable loans. We extend our deep appreciation for the insurer and reinsurer partners that work with us on unique deals such as this, along with our HFA and lender partners that originate and deliver these loans to Fannie Mae. Together, they help us serve our affordable housing mission that is at the heart of Fannie Mae’s business,” said Rob Schaefer, VP for Credit Enhancement Strategy & Management, Fannie Mae. “As this deal demonstrates, we continue to diversify our CIRT offerings, and are proud to be a leader in building and supporting the market for transferring Single-Family mortgage credit risk to private sources of capital.”
All covered loans will be originated with fixed rate notes, original terms of 21 to 30 years, and loan-to-value ratios greater than 80 percent and less than or equal to 97 percent. Fannie Mae will retain risk for the first 250 basis points of loss on the aggregate covered pool. If the approximately $43 million retention layer is exhausted, reinsurers will cover the next 880 basis points of loss on the pool, up to a maximum coverage of approximately $154 million.