Fannie Mae has announced its latest contribution to the credit risk transfer space—two Credit Insurance Risk Transfer deals that shift a portion of the credit risk on pools of single-family loans with approximately 19 point 5 billion dollars in unpaid principal balance. It is Fannie Mae’s largest cumulative credit risk transfer transaction to date.
The loans covered in the two deals are in pools consisting of 30-year fixed-rate loans with LTV ratios between 60 percent and 80 percent. The loans in the transaction were acquired by Fannie Mae from December 2014 through April 2015. In the last three years, Fannie Mae’s credit risk transfer programs such as Credit Insurance Risk Transfer, Connecticut Avenue Series, and other forms of risk transfer, have resulted in the transferring of a portion of the credit risk of more than half a trillion dollars in single-family mortgages.
Treasury is monitoring the data on HAMP step-ups closely and has created a three-pronged safety net to help borrowers should they struggle with a step-up to avoid re-defaulting. The prongs are one, requiring servicers to notify borrowers at two separate time points that a step-up is imminent; the second is introducing post-modification counseling for borrowers who are at risk of re-default and have missed a payment; and the third is an enhanced suite of tools which include increased incentives for remaining current and improved HAMP Tier 2 modification options.