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USA Real Estate Blog

Fannie Mae Announces Credit Insurance Risk Transfer Transactions

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Fannie Mae recently announced that it has secured commitments for two new front-end Credit Insurance Risk Transfer (CIRT) transactions of 2019.

“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 in a statement. “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.”

The two front-end deals, CIRT FE 2019-1 and CIRT FE 2019-2, 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. Fannie Mae has committed to acquire about $9.3 billion of insurance coverage on $359 billion of single-family loans through the CIRT program to date.

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% and less than or equal to 80%. 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% and less than or equal to 97%. The coverage and pricing of both deals are committed for 12 months, beginning with May 2019 deliveries.

Fannie Mae states that the coverage for the deals will be provided based upon actual losses for a term of 10.5 years from the effective date of May 1, 2019. The coverage on each deal may be canceled by Fannie Mae at any time on or after the 66th month following the effective date by paying a cancellation fee.

More information about Fannie Mae’s CIRT transactions can be found here.

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