Fannie Mae Completes Multi-Tranche Credit Insurance Risk Transfer Transaction on over $11 Billion of Multifamily Loans

Aleksandrs Rozens

202-752-7916

WASHINGTON, DC – Fannie Mae (FNMA/OTCQB) announced that it has completed a multi-tranche Credit Insurance Risk Transfer^™ (CIRT^™ ) transaction covering a pool of approximately $11.7 billion of existing multifamily loans in the company's portfolio. This new transaction, MCIRT 2019-01, is the fifth CIRT transaction as part of Fannie Mae's ongoing effort to increase the role of private capital in the multifamily mortgage market and mitigate risk for U.S. taxpayers.

"We are happy to introduce our first multifamily credit risk sharing transaction of 2019. Further innovation and reinsurer interest allowed us to bring to market our first three-tranche offering," said Jonathan Gross, Vice President, Multifamily, Fannie Mae. "This new transaction transferred $332 million of risk to reinsurers and insurers, making it the largest single transfer of risk for our multifamily CIRT program. Depending on market conditions, we plan to return later this year with additional multifamily CIRT transactions."

Fannie Mae's multifamily CIRT program shares risk with diversified reinsurer and insurer counterparties and supplements the Delegated Underwriting and Servicing (DUS^® ) program where originating lenders routinely share approximately one-third of the credit risk on multifamily loans.

The covered loan pool for the transaction consists of 1,155 loans, secured by 1,155 multifamily properties, acquired by Fannie Mae from July 2018 through October 2018. Each loan has an unpaid principal balance of $30 million or less.

With MCIRT 2019-01, which became effective February 1, 2019, Fannie Mae will retain risk on the first 75 basis points of losses on the reference pool. The C tranche will transfer risk to reinsurers covering losses between 75 basis points and 150 basis points. The B tranche will transfer risk to reinsurers covering losses between 150 and 275 basis points. The A tranche will transfer risk to reinsurers covering losses between 275 and 400 basis points. Finally, once the pool has experienced 400 basis points of losses, the credit protection will be exhausted and Fannie Mae will be responsible for any further losses.

Since 2016, in addition to the risk retained by its DUS lender partners, Fannie Mae has transferred a portion of the credit risk on multifamily mortgages with an aggregate unpaid principal balance of more than $51 billion through its CIRT program.

More information on Fannie Mae’s credit risk transfer activities is available at: https://www.fanniemae.com/portal/funding-the-market/credit-risk/index.html