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Fannie Mae completes credit insurance risk transfer on $18.5B of loans

Fannie Mae completed a credit insurance risk transfer transaction, which covered $18.5 billion in unpaid principal balance of 15-year and 20-year original term fixed-rate loans.

The covered loan pool consists of fixed-rate loans that Fannie Mae acquired from June 2018 through June 2019.

Under the final credit insurance risk transfer transaction for the year, which became effective Oct. 1, Fannie Mae will retain risk for the first 15 basis points of loss on the pool of single-family loans with loan-to-value ratios greater than 70% and less than or equal to 97%. If the $27.8 million retention layer is exhausted, 21 insurers and reinsurers will cover the next 130 basis points of loss on the pool, up to a maximum coverage of about $241 million.

Coverage for these deals is provided based on actual losses for a nine-year term. 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 first anniversary and each month thereafter.

Fannie Mae may cancel coverage on each deal at any time on or after the fourth anniversary of the effective date by paying a cancellation fee.