Tranched Multifamily CIRT Deal a First For Fannie Mae

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Fannie Mae recently completed its first tranched multifamily credit risk sharing transaction – a pool of approximately $10.9 billion of existing multifamily loans.

It was the company’s fourth Multifamily Credit Insurance Risk Transfer (CIRT) transaction and the first to be offered in tranches.

The company announced last month that it would start pricing its Connecticut Avenue Series (CAS) credit risk transfer (CRT) deals using a REMIC structure, with an aim toward making the product more attractive to a wider range of investors.

“We are happy to introduce our first tranched multifamily credit risk sharing transaction, which allowed us to expand reinsurer and insurer participation and realize favorable blended pricing on the tiered risk sharing,” says Jonathan Gross, vice president, multifamily, Fannie Mae, in a release. “This new transaction transferred $273 million of risk to nine reinsurers and insurers.

“This program, aimed at sharing risk with diversified reinsurer and insurer counterparties specifically, supplements our Delegated Underwriting and Servicing (DUS) program where originating lenders routinely share approximately one-third of the credit risk on our multifamily loans,” Gross adds. “Our multifamily CIRT program helps us mitigate risk on the other two-thirds of credit risk, benefitting U.S. taxpayers. We plan to return to the market next year with additional multifamily CIRT transactions.”

Since 2016, in addition to the risk transferred to its DUS lender partners, Fannie Mae has transferred a portion of the credit risk on multifamily mortgages with an aggregate unpaid principal balance of more than $39.5 billion through its CIRT program.

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