Fannie Mae’s final risk sharing transaction of the year was with reinsurers.
The company said Thursday it had offloaded the credit risk on $8.2 billion of mortgages that it insures via Credit Insurance Risk Transfer (CIRT) 2015-6. For the first time, this pool was comprised of adjustable-rate mortgages; those with interest rates that are fixed for initial terms of five, seven or 10 years and then become adjustable. All pervious CIRT transactions shifted the risk on 30-year fixed-rate mortgages.
Fannie Mae will assume the first 50 basis points of loss, or about $41 million. After that point, reinsurers would cover the next 250 basis points of loss on the pool, up to a maximum coverage of approximately $206 million.
Coverage is provided based upon actual losses for a term of 10 years.
The deal became effective Nov. 1.
Depending upon the pay down of the insured pool and the amount of insured loans that become seriously delinquent, the aggregate coverage amount may be reduced at the three-year anniversary and each anniversary of the effective date thereafter. The coverage may be canceled by Fannie Mae, with a fee, at any time on or after the five-year anniversary of the effective date.
Through this latest deal, Fannie Mae has this year acquired more than $1 billion of CIRT insurance coverage on over $40 billion of loans with six CIRT transactions, and over $1.2 billion of coverage on over $46 billion of loans since the program's inception in 2014.
The company did not disclose pricing.