Fannie Mae has announced that it has secured commitments for two front-end Credit Insurance Risk Transfer (CIRT) transactions. CIRT FE 2020-1 and CIRT FE 2020-2 together cover up to $39.6 billion in unpaid principal balance of 21-year to 30-year original-term, fixed-rate loans, including loans previously acquired from November 2019 through January 2020 and also loans to-be acquired between February 2020 and January 2021. Combined, these two deals transfer up to $1.3 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 $12.9 billion of insurance coverage on $475 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 FE 2020-1 and FE 2020-2 secure approximately $729 million and $600 million of coverage, respectively. Both are record-high levels of coverage for a low and high loan-to-value ratio CIRT transaction. These transactions were executed in March, prior to the enormous changes that have since impacted our economy and our daily lives. We appreciate our partnership with the 20 insurers and reinsurers that wrote coverage for these deals, and hope that they, their co-workers, and families all stay safe during this global crisis. These participating insurers and reinsurers have Fannie Mae’s commitment that we will use all of our resources to assist borrowers through temporary hardships related to COVID-19, and that we are adjusting our credit guidelines for lender partners to manage the risk of our new acquisitions while ensuring we meet our mission to provide liquidity to the mortgage market,” said Rob Schaefer, VP for Credit Enhancement Strategy & Management at Fannie Mae.
Coverage for these deals is provided based upon actual losses for a term of 13 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 18th month following the effective date and each month thereafter. The coverage on each deal may be canceled by Fannie Mae at any time on or after the 5 and a half-year anniversary following the effective date by paying a cancellation fee.