Fannie Mae Completes Final Credit Insurance Risk Transfer Transaction of 2021


Fannie Mae has completed its final Credit Insurance Risk Transfer (CIRT) transaction of 2021. CIRT 2021-2 covers $30.7 billion in unpaid principal balance (UPB) of generally 30-year original term, fixed-rate loans acquired from April through June 2021. The deal transferred nearly $1.2 billion of mortgage credit risk to private insurers and reinsurers.

Since inception, Fannie Mae has acquired approximately $15 billion of insurance coverage on $537 billion of single-family loans through the CIRT program, measured at the time of issuance for both post-acquisition (bulk) and front-end transactions.

“CIRT 2021-2 transferred the largest amount of mortgage credit risk through a single CIRT transaction since the inception of the program in 2014,” says Rob Schaefer, Fannie Mae’s vice president for credit enhancement strategy and management. “We appreciate our continued partnership with the 20 insurers and reinsurers that wrote coverage for this deal.”

With CIRT 2021-2, which became effective October 1, 2021, Fannie Mae will retain risk for the first 65 basis points of loss on a $30.7 billion pool of single-family loans with loan-to-value ratios greater than 80 percent and less than or equal to 97 percent. If the $199.3 million retention layer is exhausted, 20 insurers and reinsurers will cover the next 385 basis points of loss on the pool, up to a maximum coverage of approximately $1.18 billion.

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 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 September 30, 2021, $616 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.

Photo by Kostiantyn Li on Unsplash

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