The two are part of its efforts to minimize taxpayer risk by increasing private capital’s role in the mortgage market
Fannie Mae announced Monday the completion of its second set of traditional Credit Insurance Risk Transfer which will cover a total of $19.8bn in loans.
The two deals – CIRT 2017-3 and CIRT 2017-4 – are part of the government-sponsored enterprise’s efforts to minimize taxpayer risk by “increasing the role of private capital in the mortgage market.”
CIRT 2017-3 became effective in the beginning of May this year and enabled Fannie Mae to retain risk for the first 50 basis points of loss on a $17.7 billion pool of loans. If the retention layer of $88.4 million is exhausted, reinsurers will cover the following 275 basis points of loss up to a maximum coverage of $486.2 million.
CIRT 2017-4 also became effective on May 1. Fannie Mae will retain risk for the first 50 basis points of loss on a $2.2 billion pool of loans. Reinsurers will cover the next 275 basis points of loss on the pool up to $60.1 million shall the retention layer of $10.9 million be exhausted.
“The latest transactions of CIRT 2017-3 and CIRT 2017-4 transferred $546 million of risk to 17 reinsurers and insurers, and demonstrate Fannie Mae's commitment to build liquidity in the risk sharing market through the regularity and transparency of our credit risk transfer executions,” said Rob Schaefer, vice president for credit enhancement strategy & management at Fannie Mae.
To date, Fannie Mae has almost $4.3bn of insurance coverage on approximately $170 billion of loans through CIRT.