Fannie Mae has completed its first two Credit Insurance Risk Transfer transactions of 2020. CIRT 2020-1 and CIRT 2020-2 together cover $30.7 billion in unpaid principal balance of 21-year to 30-year original term fixed rate loans, previously acquired from July 2019 through October 2019. Combined, these two deals transferred nearly $1 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 $11.6 billion of insurance coverage on $435.2 billion of single-family loans through the CIRT program, measured at the time of issuance, for both post-acquisition (bulk) and front-end transactions.
"Over the past six years we have built a market for credit risk that, with each new transaction, continues to draw on the growing interest of insurers and reinsurers. We appreciate our partnership with the twenty-three insurers and reinsurers that wrote coverage for these deals, a new record-high level of participation for a single CIRT transaction," said Rob Schaefer, VP for Credit Enhancement Strategy & Management at Fannie Mae.
The transaction follows Fannie Mae's first Connecticut Avenue Securities (CAS) Seasoned B-Tranche transaction, representing the third CAS transaction of 2020. CAS 2020-SBT1 is a $966 million security offering that references loans that were included in 2015 and 2016 CAS deals. Fannie Mae's issuance program is designed to share credit risk on its single-family conventional guaranty book of business.
"This marks our second transaction in an ongoing program to transfer risk on our seasoned loan book. These transactions offer investors a different profile than our ongoing benchmark CAS REMIC transactions. We were pleased to see the strong demand for the deal, especially in light of the backdrop of global market volatility," said Laurel Davis, VP of Credit Risk Transfer, Fannie Mae. "We plan to return to the market in late March with our next benchmark CAS REMIC."
With CIRT 2020-1, which became effective January 1, 2020, Fannie Mae will retain risk for the first 35 basis points of loss on an $18.5 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 $64.6 million retention layer is exhausted, twenty-three insurers and reinsurers will cover the next 300 basis points of loss on the pool, up to a maximum coverage of approximately $553.6 million. With CIRT 2020-2, which also became effective January 1, 2020, Fannie Mae will retain risk for the first 40 basis points of loss on a $12.2 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 $48.8 million retention layer is exhausted, seventeen insurers and reinsurers will cover the next 350 basis points of loss on the pool, up to a maximum coverage of approximately $427.2 million.
Coverage for these deals 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.