Fannie Mae Locks Down Pair of CIRT Transactions

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Fannie Mae says it has secured commitments for two front-end Credit Insurance Risk Transfer (CIRT) transactions, CIRT FE 2020-1 and CIRT FE 2020-2, that together cover up to $39.6 billion in unpaid principal balance of 21-year to 30-year original-term, fixed-rate loans, including loans previously acquired from November 2019 through January 2020 and also loans to be acquired between February 2020 and January 2021.

Combined, these two deals transfer up to $1.3 billion of mortgage credit risk, as part of Fannie Mae’s ongoing effort to reduce taxpayer risk by increasing the role of private capital in the mortgage market. To date, Fannie Mae has committed to acquire approximately $12.9 billion of insurance coverage on $475 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 FE 2020-1 and FE 2020-2 secure approximately $729 million and $600 million of coverage, respectively,” says Fannie Mae’s Rob Schaefer. “Both are record-high levels of coverage for a low and high loan-to-value ratio CIRT transaction.

With CIRT FE 2020-1, which became effective February 1, Fannie Mae will retain risk for the first 35 basis points of loss on a $23.2 billion pool of single-family loans with loan-to-value ratios greater than 60 percent and less than or equal to 80 percent. If the $81 million retention layer is exhausted, 20 insurers and reinsurers will cover the next 315 basis points of loss on the pool, up to a maximum coverage of approximately $729.5 million.

With CIRT FE 2020-2, which also became effective February 1, Fannie Mae will retain risk for the first 40 basis points of loss on a $16.4 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 $65.8 million retention layer is exhausted, fifteen insurers and reinsurers will cover the next 365 basis points of loss on the pool, up to a maximum coverage of approximately $600 million.

Coverage for these deals is provided based upon actual losses for a term of 13 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 18th month following the effective date and each month thereafter. The coverage on each deal may be canceled by Fannie Mae at any time on or after the 5-1/2 year anniversary following the effective date by paying a cancellation fee.

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