"We're pleased with the continued interest and growth in our Credit Insurance Risk Transfer program. These new deals attracted a record number of twelve reinsurers, including three new participants," said Rob Schaefer, vice president for credit enhancement strategy & management, Fannie Mae. "We remain committed to managing and distributing credit risk and building liquidity in this risk-sharing market."
In CIRT 2016-7, which became effective August 1, 2016, Fannie Mae retains risk for the first 50 basis points of loss on a $10.4 billion pool of loans. If this $52 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 $260 million. With CIRT 2016-8, which also became effective August 1, 2016, Fannie Mae retains risk for the first 50 basis points of loss on a $4 billion pool of loans. If this $20 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 $100 million.
Coverage for these deals is provided based upon actual losses for a term of 10 years. Depending on the paydown 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 $759 billion in single-family mortgages through its credit risk transfer efforts. Fannie Mae expects to continue coming to market with Credit Insurance Risk Transfer and Connecticut Avenue Securities™ ("CAS") deals that allow private capital to gain exposure to the U.S. housing market.
More information on Fannie Mae's credit risk transfer activities is available at http://www.fanniemae.com/portal/funding-the-market/credit-risk/index.html.
Statements in this release regarding Fannie Mae's future credit risk transfer activities are forward-looking, and future events could be materially different as a result of future legislative or regulatory requirements or changes and many other factors, including those discussed in the "Risk Factors" section of and elsewhere in Fannie Mae's annual report on Form 10-K for the year ended December 31, 2015 and its quarterly report on Form 10-Q for the quarter ended June 30, 2016.
Fannie Mae helps make the 30-year fixed-rate mortgage and affordable rental housing possible for millions of Americans. We partner with lenders to create housing opportunities for families across the country. We are driving positive changes in housing finance to make the home buying process easier, while reducing costs and risk. To learn more, visit fanniemae.com and follow us on twitter.com/fanniemae.
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SOURCE Fannie Mae