Fannie Mae has executed its first Credit Insurance Risk Transfer (CIRT) transaction of 2022. CIRT 2022-1 covers $26.1 billion in unpaid principal balance (UPB) of generally 30-year original term, fixed-rate loans, acquired between January 2021 and March 2021. As part of Fannie Mae’s ongoing effort to reduce taxpayer risk by increasing the role of private capital in the mortgage market, this deal transferred $770.7 million of mortgage credit risk to private insurers and reinsurers.
Since inception to date, Fannie Mae has acquired approximately $15.8 billion of insurance coverage on $563 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 2022-1 begins a new, active year of CIRT issuance for Fannie Mae,” states Rob Schaefer, Fannie Mae’s vice president of capital markets. “We appreciate our continued partnership with the 22 insurers and reinsurers that wrote coverage for this deal.”
The covered loan pool for CIRT 2022-1 consists of approximately 87,600 single-family mortgage loans with an outstanding unpaid principal balance of approximately $26.1 billion. The covered pool includes collateral with loan-to-value ratios of 60.01% to 80%, which were acquired between January 2021 and March 2021. The loans included in this transaction are fixed-rate, generally 30-year term, fully amortizing mortgages and were underwritten using rigorous credit standards and enhanced risk controls.
With CIRT 2022-1, which became effective January 1, 2022, Fannie Mae will retain risk for the first 25 basis points of loss on the $26.1 million covered loan pool. If the $65.3 million retention layer is exhausted, 22 insurers and reinsurers will cover the next 295 basis points of loss on the pool, up to a maximum coverage of approximately $770.7 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 our single-family conventional guaranty book of business were included in a reference pool for a credit risk transfer transaction.