Daily market intelligence on mortgages, equity raising, investment sales, and CMBS.

Thursday, 11 April 2019

Fannie, Freddie Turn to Insurers to Take Additional Risk from Their Multifamily Loans

Fannie Mae and Freddie Mac, which last year were compelled to transfer more of the risk they take on when originating multifamily mortgages, have developed ways to effectively do so. Freddie, which relies on the sale of B-pieces of its securitizations, has supplemented that through the purchase of insurance. Fannie, meanwhile, has now transferred the risk from $51 billion of loans through insurance purchases.

Commercial Real Estate Direct Staff Report

Fannie Mae and Freddie Mac, which last year were compelled to transfer more of the risk they take on when originating multifamily mortgages, have developed ways to effectively do so.

Their regulator, the Federal Housing Finance Agency, noted that the two housing-finance agencies had achieved their risk-transfer objectives: Fannie through its Credit Insurance Risk Transfer, or CIRT program, and Freddie through its Multifamily Credit Insurance Pool, or MCIP program.

So, while the two agencies might still benefit from their implied federal guarantee, they're offloading much of the risk they otherwise would have carried and are paying to do so, reducing the value of that federal guarantee.

Freddie funds loans that are originated by its seller/servicer partners and bundles them into securities. It guarantees payment to the deals' senior bonds and sells off the first-loss pieces - the B-pieces - to third-party investors. In 2017, the agency funded $73.2 billion of loans, leaving it with $3.6 billion of credit risk. It reduced that by $3.2 billion, or 88 percent.

Since 2010, Freddie has used its securitization program - its flagship is the K-series - to transfer the risk for 90 percent of the balance of the loans it funded.

In order to transfer even more risk off its balance sheet, the agency in the fourth quarter completed its...





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  • Breaking mortgage, CMBS, and REIT news

  • Quarterly league tables with rankings of B-piece buyers, book runners, and lenders

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Data Digest

 

CMBS DELINQUENCY VOLUME

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CMBS SPECIAL SERVICING VOLUME

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Top Bookrunners Domestic, Private-Label CMBS - 2017
Investment Bank #Deals Vol$mln MktShr%
Goldman Sachs 17.59 11,819.34 13.68
JPMorgan Securities 14.52 10,968.11 12.70
Citigroup 12.04 10,012.71 11.59
Wells Fargo Securities 14.02 9,936.06 11.50
Deutsche Bank 12.55 9,879.74 11.44

 

RCA CPPI

 

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CMBS 2.0 Spreads

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Top CMBS Loan Contributors - 2017
Lender #Loans Vol$mln MktShr%
Goldman Sachs 146.89 11,719.34 13.63
JPMorgan Chase Bank 117.68 10,114.14 11.76
Deutsche Bank 198.48 9,689.97 11.27
Morgan Stanley 166.18 8,539.78 9.93
Citigroup 199.05 8,088.24 9.41

 

 

 

REITCafe

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shouldn’t be a surprise as it comes while the yield from 10-year Treasury bonds, the benchmark against which most REIT’s price their bonds
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