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Fannie Mae completes multifamily credit insurance risk transfer transaction

Fannie Mae completed a multitranche multifamily credit insurance risk transfer transaction, which covered a pool of about $9.9 billion of multifamily loans in its portfolio.

The covered loan pool consists of 1,042 loans, which the government-sponsored enterprise acquired from March through June, and each loan has $30 million or less in unpaid principal balance. The loan pool is secured by 1,060 multifamily properties.

Under the third multitranche credit risk insurance transfer for the year, which became effective Nov. 1, 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 of 75 basis points to 150 basis points, and the B tranche will transfer risk to reinsurers covering losses of 150 basis points to 275 basis points. The A tranche will transfer risk to reinsurers covering losses of 275 basis points to 400 basis points.

Fannie Mae will be responsible for further losses once the covered loan pool has experienced 400 basis points of losses.

This transaction transferred about $293 million of risk to reinsurers and insurers, Jonathan Gross, Fannie Mae's vice president of multifamily, said in a news release. The GSE expects to close one multifamily credit insurance risk transfer transaction per quarter in 2020, subject to market conditions.