Transaction aims to mitigate risk for US taxpayers
As part of its efforts to extend the role of private capital in the multifamily mortgage market, Fannie Mae has announced the completion of its multi-tranche credit insurance risk transfer (CIRT) transaction.
This is Fannie Mae’s fifth CIRT transaction and covers a pool of nearly $11.7 billion of the GSE’s portfolio of existing multifamily loans. The transaction is meant to mitigate risk for US taxpayers, said the GSE.
Fannie Mae’s multifamily CIRT program shares risk with both insurers and reinsurers. The program also boosts the GSE’s delegated underwriting and servicing (DUS) program, where originating lenders regularly share about one-third of the credit risk on multifamily loans.
From July to October 2018, Fannie Mae secured 1,155 multifamily properties and acquired the covered loan pool for the transaction. According to the GSE, each loan has an unpaid principal balance of $30 million or less.
With over $51 billion of aggregate unpaid principal balance, Fannie Mae has been transferring some of the credit risk on multifamily mortgages to its CIRT program since 2016.
"We are happy to introduce our first multifamily credit risk sharing transaction of 2019," said Jonathan Gross, vice president of multifamily at Fannie Mae. “Further innovation and reinsurer interest allowed us to bring to market our first three-tranche offering. 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."
