Fannie Mae has obtained an additional $563 million of mortgage reinsurance through three transactions.

The deals, Credit Insurance Risk Transfer 2016-4, CIRT 2016-5, and CIRT 2016-6, shift a portion of the risk of default on pools of single-family loans with a total unpaid principal balance of $22.5 billion to a group of insurers and reinsurers.

All three transactions became effective May 1.

The covered loan pools for the three transactions consist of 30-year fixed rate loans with loan-to-value (LTV) ratios of between 80% and 97% that were acquired by Fannie Mae from December 2014 through December 2015.

“We are pleased that interest from insurers and reinsurers in our CIRT program continues to grow, as demonstrated by our ability to cover this large aggregate pool of loans, and this reflects the confidence that those participants have in Fannie Mae’s strong credit risk management approach,” said Rob Schaefer, vice president for credit enhancement strategy and management. “We’re making solid progress distributing credit risk to private capital and away from Fannie Mae and taxpayers.”  

In CIRT 2016-4, Fannie Mae retains risk for the first 50 basis points of loss on a $9.7 billion pool of loans. If this $48.6 million retention layer is exhausted, reinsurers will cover the next 250 basis points of loss on the pool, up to a maximum coverage of approximately $243 million.

With CIRT 2016-5, Fannie Mae retains risk for the first 50 basis points of loss on a $9 billion pool of loans. If this $45 million retention layer is exhausted, an insurer will cover the next 250 basis points of loss on the pool, up to a maximum coverage of approximately $226 million.

In CIRT 2016-6, Fannie Mae retains risk for the first 50 basis points of loss on a $3.8 billion pool of loans. If this $18.8 million retention layer is exhausted, an insurer will cover the next 250 basis points of loss on the pool, up to a maximum coverage of approximately $94 million.

Coverage for these deals is provided based upon actual losses for a term of 10 years. Depending upon the pay down of the insured pool and the principal 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 at any time on or after the five-year anniversary of the effective date by paying a cancellation fee.

Since 2013, Fannie Mae has transferred a portion of the credit risk on $656 billion in single-family mortgages through various types of transactions. 

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.