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Fannie Mae Executes 1st Credit Insurance Risk Transfer Of 2021

David Krechevsky
Nov 03, 2021
Fannie Mae HQ

Covers $31.7B in unpaid principal balance of generally 30-year original term, fixed-rate loans.

KEY TAKEAWAYS
  • Since the inception of the CIRT program, Fannie Mae said, it has acquired approximately $13.9 billion of insurance coverage on $506 billion of single-family loans.

The Federal National Mortgage Association, or Fannie Mae, has completed its first Credit Insurance Risk Transfer (CIRT) transaction of 2021, the association said Wednesday.

CIRT 2021-1 covers $31.7 billion in unpaid principal balance (UPB) of generally 30-year original term, fixed-rate loans acquired from January through March 2021, the association said. The deal transferred nearly $1 billion of mortgage credit risk. Since the inception of the CIRT program, Fannie Mae said, it has acquired approximately $13.9 billion of insurance coverage on $506 billion of single-family loans, measured at the time of issuance for both post-acquisition (bulk) and front-end transactions.

“We are pleased with the execution of CIRT 2021-1 and appreciate our partnership with the 20 insurers and reinsurers that wrote coverage for this deal,” said Rob Schaefer, Fannie Mae’s vice president for credit enhancement strategy & management.

With CIRT 2021-1, which became effective Sept. 1, Fannie Mae will retain risk for the first 60 basis points of loss on a $31.7 billion pool of single-family loans with loan-to-value ratios greater than 80% and less than or equal to 97%, the association said. If the $190 million retention layer is exhausted, 20 insurers and reinsurers will cover the next 315 basis points of loss on the pool, up to a maximum coverage of approximately $998 million, it said.

Coverage for the deal is provided based upon actual losses for a term of 12.5 years, Fannie Mae said. 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, it said. The coverage on each deal may be canceled by Fannie Mae at any time on or after the five-year anniversary of the effective date by paying a cancellation fee.

As of Sept. 30, Fannie Mae said, $616 billion 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.

To promote transparency and help insurers and reinsurers evaluate the CIRT program, Fannie Mae said it provides ongoing, robust disclosure data, as well as access to news, resources, and analytics through its credit risk transfer webpages. This includes Fannie Mae's innovative Data Dynamics tool that enables market participants to interact with and analyze both CIRT deals that are currently outstanding in the market and Fannie Mae's historical loan dataset. For information on individual CIRT transactions, visit our Credit Insurance Risk Transfer website.

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