US MBS packager Fannie Mae halves Q2 insurance limit

Fannie Mae, the US government-backed firm that packages mortgage-backed securities, bought $1.2 billion in excess of loss limit on $44.7 billion in housing portfolios during the second quarter, down notably from the prior year period as reinsurance terms tightened.

The Q2 sum on credit insurance risk transfer (CIRT) transactions, is down 51% year on year and brought the H1 tally to $3.05 billion, also a 48% year on year decline, a Fannie Mae dataset indicated.

Coverage is is down even more than limit: the decline in underlying portfolio volumes is down closer to 40% year on year for both Q2 and H1.

As on the broader reinsurance market, Fannie Mae has had to give ground on retentions. Q2 average retentions have doubled even as underlying portfolio sizes have come down nearly 40%.

Credit insurance risk transfer transactions transfer credit risk on a pool of loans to an insurance provider, which may then transfer that risk to one or more reinsurers, complementing Fannie Mae's fuller palette of market-based risk transfer offerings.

Since inception to date, Fannie Mae has acquired approximately $25.2 billion of insurance coverage on $850 billion of single-family loans through the CIRT programme as measured at issuance.

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