Fannie Mae announced the execution of its fourth Credit Insurance Risk Transfer [1] (CIRT) transaction of 2022.
Dropping nearly 12% from the first transaction of $26 billion executed [2] in February, Fannie Mae will retain risk for the first 45 basis points of loss on the $23.1 billion covered loan pool.
As part of Fannie Mae's ongoing effort to reduce taxpayer risk by increasing the role of private capital in the mortgage market, CIRT 2022-4 transferred $844.8 million of mortgage credit risk to private insurers and reinsurers.
Since its inception to date, Fannie Mae has acquired approximately $18.4 billion of insurance coverage on $635.6 billion of single-family loans through the CIRT program, measured at the time of issuance for both post-acquisition and front-end transactions.
"We appreciate our continued partnership with the 22 insurers and reinsurers that have committed to write coverage for this deal," said Rob Schaefer, Fannie Mae VP for Capital Markets.
The covered loan pool for CIRT 2022-4 consists of approximately 76,600 single-family mortgage loans with an outstanding unpaid principal balance of approximately $23.1 billion. The covered pool includes collateral with loan-to-value ratios of 60.01% to 80% acquired between June 2021 and August 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 2022-4, which became effective March 1, 2022, Fannie Mae will retain risk for the first 45 basis points of loss on the $23.1 billion covered loan pool. If the $104.2 million retention layer is exhausted, 22 insurers and reinsurers will cover the next 365 basis points of loss on the pool, up to a maximum coverage of $844.8 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 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 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.
To promote transparency and to help insurers and reinsurers evaluate the CIRT program, Fannie Mae provides ongoing, robust disclosure data, as well as access to news, resources, and analytics through its credit risk transfer webpages.
For more information on individual CIRT transactions, click here [3].