Fannie Mae just rolled out the first credit insurance risk transfer program in the multifamily industry.
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.
“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.
“That was the premise behind the single-family CIRT programs, and we in the multifamily identified an opportunity to basically apply the same thing and say, ‘here’s another class of risk which is not highly correlated to your core property casualty and catastrophic risk books as well as provides a natural hedge to single-family risk,’” Gross continued.
Gross said the other factor putting wind in the multifamily CIRT sails is the DUS program’s strong performance history.
Fannie Mae originally floated the multifamily CIRT product in 2016 and then again in 2017 before deciding the market was ready for multifamily CIRTs to become a full-fledged program.