Fannie Mae has executed its seventh and eighth Credit Insurance Risk Transfer (CIRT) transactions of 2022, the government-sponsored enterprise (GSE) said Friday.
As part of Fannie Mae’s effort to reduce taxpayer risk by increasing the role of private capital in the mortgage market, CIRT 2022-7 and CIRT 2022-8 transferred $1 billion of mortgage credit risk to private insurers and reinsurers.
To date, Fannie Mae has acquired approximately $21 billion of insurance coverage on $709 billion of single-family loans through the CIRT program, measured at the time of issuance for both post-acquisition (bulk) and front-end transactions.
“We appreciate our continued partnership with the 24 insurers and reinsurers that have committed to write coverage for these deals,” said Rob Schaefer, Fannie Mae’s vice president for capital markets.
In testimony Wednesday before the U.S. House Committee on Financial Services, Director Sandra L. Thompson of the FHFA, which supervises the conservatorship of both Fannie Mae & Freddie Mac, said transferring credit risk to the private sector is a key part of improving the soundness and safety of the GSEs.
The covered loan pool for CIRT 2022-7 consists of approximately 64,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $19.8 billion. The covered pool includes collateral with loan-to-value (LTV) ratios of 60.01% to 80% percent acquired in September 2021. The loans included in this transaction are fixed-rate, generally 30-year term, fully amortizing mortgages and were underwritten using rigorous credit standards and enhanced risk controls, Fannie Mae said.
With CIRT 2022-7, which became effective June 1, Fannie Mae will retain risk for the first 55 basis points of loss on the $19.8 billion covered loan pool. If the $109 million retention layer is exhausted, 24 insurers and reinsurers will cover the next 335 basis points of loss on the pool, up to a maximum coverage of $664 million, the enterprise said.
The covered loan pool for CIRT 2022-8 consists of approximately 43,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $12.9 billion. The covered pool includes collateral with LTV ratios of 80.01% to 97% acquired between August and September 2021. The loans included in this transaction are fixed-rate, generally 30-year term, fully amortizing mortgages and were underwritten using rigorous credit standards and enhanced risk controls, Fannie Mae said.
With CIRT 2022-8, which became effective June 1, Fannie Mae will retain risk for the first 65 basis points of loss on the $12.9 billion covered loan pool. If the $84 million retention layer is exhausted, 19 insurers and reinsurers will cover the next 275 basis points of loss on the pool, up to a maximum coverage of $354 million, the enterprise said.
Coverage for these deals is provided based upon actual losses for a term of 12.5 years. Depending on the paydown of the insured pools and the principal amount of insured loans that become seriously delinquent, the aggregate coverage amounts may be reduced at the one-year anniversary and each month thereafter, Fannie Mae said. The coverage on these deals 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, it said.
“As of March 31, 2022, approximately $906 billion in outstanding UPB of loans in our single-family conventional guaranty book of business were included in a reference pool for a credit risk transfer transaction,” Fannie Mae said.
“To promote transparency and to help insurers and reinsurers evaluate the CIRT program, Fannie Mae provides ongoing, robust disclosure data, as well as access to news, resources, and analytics through its credit risk transfer webpages.” the enterprise said. “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.”
