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Fannie Mae Executes Ninth Credit Insurance Risk Transfer of 2022

Fannie Mae has executed its ninth Credit Insurance Risk Transfer (CIRT) transactions of 2022. 

CIRTs are part of the GSEs’ ongoing effort to reduce taxpayer risk by increasing the role of private capital in the mortgage market, as CIRT 2022-7 and CIRT 2022-8 transferred $1 billion of mortgage credit risk to private insurers and reinsurers. Since inception to date, Fannie Mae has acquired approximately $21 billion of insurance coverage on $709 billion of single-family loans through the CIRT program, measured at the time of issuance for both post-acquisition (bulk), and front-end transactions. 

The covered loan pool for CIRT 2022-9 consists of approximately 69,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $21 billion. The covered pool includes collateral with loan-to-value (LTV) ratios of 60.01 percent to 80.00 percent acquired in October 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 2022-9, which became effective August 1, 2022, Fannie Mae will retain risk for the first 55 basis points of loss on the $21 billion covered loan pool. If the $115 million retention layer is exhausted, 23 insurers and reinsurers will cover the next 335 basis points of loss on the pool, up to a maximum coverage of $700 million. 

Fannie Mae also sets servicing standards, acts as Master Servicer, and provides oversight of loan servicers—setting standards for loss mitigation and borrower workout options. The GSE also conducts all property management and disposition in-house, managing one of the industry's largest real estate-owned portfolios. Their strategy is to sell non-distressed homes to owner-occupants, helping to maximize sales proceeds, stabilize neighborhoods, and preserve the value of its guaranty book. 

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 this 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 June 30, 2022, approximately $1.02 trillion 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. 

"We appreciate our continued partnership with the 23 insurers and reinsurers that have committed to write coverage for this deal," said Rob Schaefer, Fannie Mae VP for Capital Markets. 

As of June 30, 2022, approximately $1.02 trillion 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. 

About Author: Kyle G. Horst

Kyle G. Horst is a reporter for DS News and MReport. A graduate of the University of Texas at Tyler, he has worked for a number of daily, weekly, and monthly publications in South Dakota and Texas. With more than 10 years of experience in community journalism, he has won a number of state, national, and international awards for his writing and photography including best newspaper design by the Associated Press Managing Editors Group and the international iPhone photographer of the year by the iPhone Photography Awards. He most recently worked as editor of Community Impact Newspaper covering a number of Dallas-Ft. Worth communities on a hyperlocal level. Contact Kyle G. at [email protected]
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