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12 July 2019Insurance

Fannie Mae completes $14bn credit risk transfer deals

Fannie Mae, the US government-backed financial institution that provides liquidity to the US mortgage markets by buying mortgages from lenders, has completed two new front-end credit insurance risk transfer (CIRT) deals.

The deals will together cover up to $14 billion of loans to be acquired by Fannie Mae between May 2019 through April 2020, and transfer up to $455 million of credit risk on those covered loans.

The transactions are a part of Fannie Mae's effort to reduce taxpayer risk by increasing the role of private capital in the mortgage market. Fannie Mae has committed to acquire about $9.3 billion of insurance coverage on $359 billion of single-family loans through the CIRT programme to date.

Both the coverage and pricing of the deals are committed for 12 months, beginning with May 2019 deliveries.

With CIRT FE 2019-1, Fannie Mae will retain risk for the first 50 basis points of loss on an approximately $8 billion pool of single-family loans with loan-to-value ratios greater than 60 percent and less than or equal to 80 percent. If the $40 million retention layer is exhausted, reinsurers will cover the next 325 basis points of loss on the pool, up to a maximum coverage of approximately $260 million.

With CIRT FE 2019-2, Fannie Mae will retain risk for the first 50 basis points of loss on a $6 billion pool of single-family loans with loan-to-value ratios greater than 80 percent and less than or equal to 97 percent. If the $30 million retention layer is exhausted, reinsurers will cover the next 325 basis points of loss on the pool, up to a maximum coverage of approximately $195 million.

"Nineteen insurers and reinsurers participated on these two front-end CIRT transactions, providing Fannie Mae the certainty of forward coverage on loans that we will acquire over a 12-month period," said Rob Schaefer, vice president for credit enhancement strategy & management, Fannie Mae. "We are proud to be a leader in building and supporting the market for transferring single-family mortgage credit risk to private sources of capital."

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More on this story

Insurance
28 March 2019   Fannie Mae, the US government-backed financial institution that provides liquidity to the US mortgage markets by buying mortgages from lenders, has completed a multi-tranche credit insurance risk transfer (CIRT) transaction that covers a pool of $11.7 billion of multifamily loans.
Insurance
11 March 2020   "We expect to be in the market with one transaction in each quarter," says VP Jonathan Gross.
Insurance
28 May 2020   20 insurers and reinsurers wrote coverage for two front-end credit insurance risk transfer (CIRT) deals.