Fannie Mae just rolled out the first credit insurance risk transfer program in the multifamily industry.
The first transaction under the new program was announced last week, an $11.1 billion Credit Insurance Risk Transfer transaction covering multifamily loans originated between October 2017 and January 2018 and deferring that risk to seven undisclosed insurers and reinsurers.
It is important to note that this risk transfer is on the two thirds of risk the Fannie Mae holds on each of the loans its Delegated Underwriting Servicing lenders originate. DUS lenders hang on to the remaining third of the total risk.
Fannie Mae Vice President of Multifamily Jonathan Gross said the launch of this program accomplishes two main objectives near and dear to the government sponsored enterprise’s heart: First, it lowers taxpayer risk, and second, it opens up a whole new capital stream for the multifamily industry, which Gross says is part of Fannie’s mission to structurally increase the liquidity, stability and sustainability of the market.
“This allows us to bring in an additional source of capital into the multifamily market. Before we developed these transactions and developed them into a program, there wasn’t really any reinsurance capital connected into the multifamily market,” Gross told HousingWire.
“Anything that we can do to structurally increase sources of liquidity in the multifamily market is something that we view as core to our mission,” he added.
The multifamily CIRT program is built on the shoulders of the single-family CIRT program.
Back in 2014, Fannie rolled out single-family CIRTs with the intent of offering insurers and reinsurers the diversification they craved in their risk portfolios.
“The value proposition to the reinsurance community was that…