Fannie Mae’s latest CIRT transfers $725 million in mortgage credit risk

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Fannie Mae has executed its sixth Credit Insurance Risk Transfer (CIRT) transaction of 2022. As part of Fannie Mae’s ongoing efforts to reduce taxpayer risk by increasing the role of private capital in the mortgage market, the CIRT 2022-6 transferred $725 million of risk mortgage credit to private insurers and reinsurers. Since its inception to date, Fannie Mae has acquired insurance coverage of approximately $19.9 billion on $675.9 billion in single family loans through the CIRT program, measured at the time of issuance for post-acquisition (wholesale) and initial transactions.

“We appreciate our continued partnership with the 24 insurers and reinsurers who have committed to underwriting cover for this transaction,” said Rob Schaefer, Fannie Mae vice president for capital markets.

The covered loan pool for CIRT 2022-6 consists of approximately 63,000 single-family mortgages with an outstanding principal balance of approximately $19.3 billion. The covered pool includes collateral with loan-to-value ratios of 60.01% to 80% acquired between August 2021 and September 2021. Loans included in this transaction are fixed rate mortgages, typically with 30-year terms , fully amortizable and were underwritten using rigorous credit standards and enhanced risk controls.

With CIRT 2022-6, which became effective May 1, 2022, Fannie Mae will retain risk for the first 55 basis points of loss on the $19.3 billion Covered Loan Pool. If the $106.3 million retention layer is depleted, 24 insurers and reinsurers will cover the next 375 basis points of loss out of the pool, up to a maximum coverage of $725 million.

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 coverage amount 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 March 31, 2022, approximately $906 billion of UPB’s outstanding loans in our single-family conventional collateral portfolio have been included in a reference pool for a credit risk transfer operation.

Image: Blake Wheeler on Unsplash

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