Fannie Mae Completes 10th Credit Insurance Risk Transfer

Fannie Mae completed its 10th Credit Insurance Risk Transfer (CIRT) transaction of 2016 worth $11.7 billion, according to a recent report from the GSE.

The report says that CIRT 2016-9 is part of “an ongoing effort to reduce taxpayer risk by increasing the role of private capital in the mortgage market.”

According to Fannie Mae’s website, “CIRT is a key risk-sharing vehicle that complements the CAS program” and “CIRT deals transfer a portion of the credit risk on a pool of loans to an insurance provider who then transfers that risk to one or more reinsurers.”

What makes this particular CIRT transaction unique, according to the GSE, is the fact that for the first time since these offerings began in 2014, these pools contain 15-year and 20-year fixed rate mortgages. Fannie Mae says that this will give reinsurers a greater variety in their investment opportunity.

“With CIRT 2016-9, we identified a new segment of loans for which risk sharing was economical and that proved attractive to our risk-sharing reinsurer partners,” said Rob Schaefer, VP for Credit Enhancement Strategy & Management, Fannie Mae. “By including 15-year and 20-year loans in the transaction, Fannie Mae has expanded the scope of our credit risk transfer programs that help shift risk away from the company, reduce taxpayer risk, and help create a safer, stronger housing finance system.”

The GSE says CIRT-2016-9 took effect on October 1, 2016. Including this latest offering, Fannie Mae reports that it has acquired over $3 billion in insurance coverage on loans totaling more than $124 billion.

“In 2017, depending on market conditions, Fannie Mae expects to continue coming to market with CIRT and Connecticut Avenue Securities deals that allow private capital to gain exposure to the U.S. housing market,” adds the report.