Fannie Mae has completed a credit insurance risk transfer transaction, its first in 2018, which covers $16.9 billion of single-family loans.
The transaction, which became effective Feb. 1, is a part of Fannie Mae's ongoing effort to reduce taxpayer risk by increasing the role of private capital in the mortgage market. With this transaction, the company will retain risk for the first 50 basis points of loss on a $16.9 billion pool of loans. If the $84.4 million retention layer is exhausted, reinsurers will cover the next 275 basis points of loss on the pool, up to a maximum coverage of approximately $464.1 million.
Coverage for these deals will be provided based upon actual losses for a term of 10 years and may be canceled by Fannie Mae at any time on or after the fifth anniversary of the effective date by paying a cancellation fee.