Fannie Mae has executed its second and third Credit Insurance Risk Transfer (CIRT) transactions of 2022. As part of Fannie Mae’s ongoing effort to reduce taxpayer risk by increasing the role of private capital in the mortgage market, CIRT 2022-2 and CIRT 2022-3 together transferred $1.8 billion of mortgage credit risk to private insurers and reinsurers.
“We appreciate our continued partnership with the 25 insurers and reinsurers that have committed to write coverage for these two deals,” states Rob Schaefer, Fannie Mae’s vice president for capital markets.
The covered loan pool for CIRT 2022-2 consists of approximately 87,400 single-family mortgage loans with an outstanding unpaid principal balance of approximately $26.5 billion. The covered pool includes collateral with loan-to-value ratios of 60.01% to 80%, which were acquired between April 2021 and June 2021. The covered loan pool for CIRT 2022-3 consists of approximately 76,600 single-family mortgage loans with an outstanding unpaid principal balance of approximately $23.3 billion. The covered pool includes collateral with loan-to-value ratios greater than 80% and less than or equal to 97%, which were acquired between July 2021 and September 2021. The loans included in both transactions are fixed-rate, generally 30-year term, fully amortizing mortgages and were underwritten using rigorous credit standards and enhanced risk controls.
With CIRT 2022-2, which became effective February 1, 2022, Fannie Mae will retain risk for the first 25 basis points of loss on the $26.5 billion covered loan pool. If the $66.3 million retention layer is exhausted, 22 insurers and reinsurers will cover the next 335 basis points of loss on the pool, up to a maximum coverage of approximately $889 million. With CIRT 2022-3, which also became effective February 1, 2022, Fannie Mae will retain risk for the first 65 basis points of loss on the $23.3 billion covered loan pool. If the $151.6 million retention layer is exhausted, 23 insurers and reinsurers will cover the next 385 basis points of loss on the pool, up to a maximum coverage of approximately $898 million.
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 December 31, 2021, $750 billion in outstanding UPB of loans in Fannie Mae’s single-family conventional guaranty book of business were included in a reference pool for a credit risk transfer transaction.