Fannie Mae performs ninth credit insurance risk transfer of 2022

Fannie Mae executed its ninth Credit Insurance Risk Transfer (CIRT) transaction of 2022.

CIRTs are part of GSEs’ ongoing efforts to reduce taxpayer risk by increasing the role of private capital in the mortgage market, as CIRTs 2022-7 and CIRTs 2022-8 transferred $1 billion of mortgage credit risk to private insurers and reinsurers. Since its inception to date, Fannie Mae has acquired approximately $21 billion in insurance coverage on $709 billion in single-family loans through the CIRT program, measured at the time of issuance for post- acquisition (roughly) and initials.

The covered loan pool for CIRT 2022-9 consists of approximately 69,000 single-family mortgages with an outstanding principal balance of approximately $21 billion. The covered pool includes collateral with loan-to-value (LTV) ratios of 60.01% to 80.00% acquired in October 2021. The loans included in this transaction are fixed rate mortgages, typically with terms of 30 years, fully amortizing and were underwritten using rigorous credit standards and enhanced risk controls.

With CIRT 2022-9, which became effective August 1, 2022, Fannie Mae will retain risk for the first 55 basis points of loss on the $21 billion Covered Loan Pool. If the $115 million retention layer is depleted, 23 insurers and reinsurers will cover the next 335 basis points of loss out of the pool, up to a maximum coverage of $700 million.

Fannie Mae also sets service standards, acts as Master Servicer and provides oversight for loan servicers, setting standards for loss mitigation and borrower recovery options. The GSE also handles the management and disposal of all property in-house, managing one of the largest property portfolios in the industry. Their strategy is to sell homes in good condition to owner-occupiers, helping to maximize sales proceeds, stabilize neighborhoods and preserve the value of its warranty book.

The coverage of this transaction is based on actual losses for a period of 12.5 years. Depending on the repayment of the insured pool and the principal amount of insured loans that become seriously delinquent, the aggregate amount of coverage may be reduced on the one-year anniversary and monthly thereafter. Coverage under this Agreement may be canceled by Fannie Mae at any time after the fifth anniversary of the Effective Date by paying a cancellation fee.

As of June 30, 2022, approximately $1.02 trillion of UPB’s outstanding loans in our single family conventional collateral portfolio have been included in a reference pool for a credit risk transfer transaction.

“We appreciate our continued partnership with the 23 insurers and reinsurers who have committed to underwriting coverage for this agreement,” said Rob SchaeferFannie Mae Vice President of Capital Markets.

As of June 30, 2022, approximately $1.02 trillion of UPB’s outstanding loans in our single family conventional collateral portfolio have been included in a reference pool for a credit risk transfer transaction.

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