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Fannie Mae Finalizes $18.5B Credit Insurance Risk Transfer

Fannie Mae has announced that it has completed its eighth and final Credit Insurance Risk Transfer (CIRT) transaction of 2019, covering loans previously acquired by the company. The deal, CIRT 2019-5, covers $18.5 billion in unpaid principal balance of 15-year and 20-year original term fixed rate loans, as part of Fannie Mae’s ongoing effort to reduce taxpayer risk by increasing the role of private capital in the mortgage market. To date, Fannie Mae has committed to acquire approximately $10.6 billion of insurance coverage on $404.6 billion of single-family loans through the CIRT program, measured at the time of issuance for both post-acquisition (bulk) and front-end transactions.

“With twenty-one insurers and reinsurers providing coverage, demand for this transaction was again among the strongest we’ve ever had,” said Rob Schaefer, VP for Credit Enhancement Strategy & Management at Fannie Mae. “With CIRT 2019-5, we expanded our coverage of 15- and 20-year fixed rate loans, relative to prior CIRT deals that covered similar product, by including loans with lower loan to value ratios. Additionally, we increased our risk transfer, relative to those prior deals, by extending the deal term from 7.5 years to 9 years and reducing our first loss retention layer to 15 basis points.  We appreciate the support of our reinsurer partners as they help us enhance and expand our CIRT program.”

With CIRT 2019-5, which became effective October 1, 2019, Fannie Mae will retain risk for the first 15 basis points of loss on a $18.5 billion pool of single-family loans with loan-to-value ratios greater than 70% and less than or equal to 97%. If the $27.8 million retention layer is exhausted, twenty-one insurers and reinsurers will cover the next 130 basis points of loss on the pool, up to a maximum coverage of approximately $241 million.

The covered loan pool for the CIRT 2019-5 consists of fixed-rate loans that were acquired by Fannie Mae from June 2018 through June 2019. A summary of key deal terms, including pricing, for these new and past CIRT transactions can be found here. [1]