Fannie Mae has executed its second and third Credit Insurance Risk Transfer (CIRT) transactions of 2022.
According to the firm, it has transferred $1.8bn of mortgage credit risk to private insurers and reinsurers. Since inception to date, Fannie Mae has acquired approximately $17.6bn of insurance coverage on $612bn of single-family loans through the CIRT program, measured at the time of issuance for both post-acquisition (bulk) and front-end transactions.
Rob Schaefer, VP for capital markets at Fannie Mae, said in a statement: “We appreciate our continued partnership with the 25 insurers and reinsurers that have committed to write coverage for these two deals.”
The covered loan pool for CIRT 2022-2 consists of approximately 87,400 single-family mortgage loans with an outstanding unpaid principal balance of approximately $26.5bn. The covered pool includes collateral with loan-to-value ratios of 60.01% to 80.00%, which were acquired between April 2021 and June 2021.
The covered loan pool for CIRT 2022-3 consists of approximately 76,600 single-family mortgage loans with an outstanding unpaid principal balance of approximately $23.3bn. The covered pool includes collateral with loan-to-value ratios greater than 80% and less than or equal to 97%, which were acquired between July 2021 and September 2021. The loans included in both transactions are fixed-rate, generally 30-year term, fully amortizing mortgages and were underwritten using rigorous credit standards and enhanced risk controls.
With CIRT 2022-2, which became effective February 1, 2022, Fannie Mae will retain risk for the first 25 basis points of loss on the $26.5bn covered loan pool. If the $66.3m retention layer is exhausted, 22 insurers and reinsurers will cover the next 335 basis points of loss on the pool, up to a maximum coverage of approximately $889m.
With CIRT 2022-3, which also became effective February 1, 2022, Fannie Mae will retain risk for the first 65 basis points of loss on the $23.3bn covered loan pool. If the $151.6m retention layer is exhausted, 23 insurers and reinsurers will cover the next 385 basis points of loss on the pool, up to a maximum coverage of approximately $898m.
Coverage for this deal is provided based upon actual losses for a term of 12.5 years. Depending on the paydown of the insured pool and the principal amount of insured loans that become seriously delinquent, the aggregate coverage amount may be reduced at the one-year anniversary and each month thereafter.
The coverage on each deal may be cancelled by Fannie Mae at any time on or after the five-year anniversary of the effective date by paying a cancellation fee.
As of December 31, 2021, $750bn in outstanding UPB of loans in its single-family conventional guaranty book of business were included in a reference pool for a credit risk transfer transaction.
