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Fannie Mae insures $14.8B in fixed-rate loans

Fannie Mae has secured coverage for $14.8 billion in unpaid principal balance of 21-year to 30-year original term fixed-rate loans after completing its sixth Credit Insurance Risk Transfer transaction.

The deal became effective Aug. 1. Fannie Mae has committed to acquire approximately $10 billion of insurance coverage on $375 billion of single-family loans through the Credit Insurance Risk Transfer, or CIRT, program.

The deal marked the first time a 30-year bulk CIRT transaction was structured with an extended policy term of 12.5 years and a 40 basis point retention layer. Similar past deals had 10-year policy terms and retention layers of between 50 and 60 basis points. Twenty-one insurers and reinsurers are providing coverage.

Fannie Mae will retain risk for the first 40 basis points of loss on a $14.8 billion pool of single-family loans with loan-to-value ratios greater than 60% and less than or equal to 80%. If the $59 million retention layer is exhausted, reinsurers will cover the next 325 basis points of loss on the pool, up to maximum coverage of approximately $479 million.

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 one-year anniversary and each month thereafter. Coverage on each deal 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.

The covered loan pool consists of fixed-rate loans acquired by Fannie Mae from December 2018 through June.