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Monday, December 5, 2022

For $9.6 Billion in Single-Family Loans, FANNIE MAE Completes Tenth Credit Insurance Risk Transfer Transaction of 2022

BusinessFor $9.6 Billion in Single-Family Loans, FANNIE MAE Completes Tenth Credit Insurance Risk Transfer Transaction of 2022

Fannie Mae announced that its tenth Credit Insurance Risk TransferTM (CIRTTM) transaction of 2022 has been completed. CIRT 2022-10 allocated $265 million in mortgage credit risk to private insurers and reinsurers as part of Fannie Mae’s continued endeavour to decrease taxpayer risk by enhancing the involvement of private capital in the mortgage market. Fannie Mae has bought roughly $22 billion of insurance coverage on $740 billion of single-family loans through the CIRT programme, calculated at the time of issue for both post-acquisition (bulk) and front-end transactions, since the program’s start.

“We value our continuous relationship with the 18 insurers and reinsurers who have agreed to provide coverage for this transaction,” said Rob Schaefer, Vice President of Capital Markets for Fannie Mae.

The covered loan pool for CIRT 2022-10 is comprised of roughly 31,000 single-family mortgage loans with unpaid principal balances totaling approximately $9.6 billion. The covered pool consists of collateral with loan-to-value (LTV) ratios between 80.01 and 97.00 percent that was obtained between September and December 2021. The loans involved in this transaction are primarily 30-year, fully amortising, fixed-rate mortgages that were underwritten utilising stringent credit requirements and heightened risk controls.

Fannie Mae will maintain risk for the first 75 basis points of loss on the $9.6 billion covered loan pool under CIRT 2022-10, which went into effect on September 1, 2022. 18 insurers and reinsurers will pay the next 275 basis points of loss on the pool, up to a maximum of $265 million, if the $72 million retention layer is depleted.

This transaction is insured against real losses for a period of 12.5 years. At the one-year anniversary and each month afterwards, the aggregate coverage amount may be lowered depending on the paydown of the insured pool and the principal amount of covered loans that become substantially overdue. Fannie Mae may terminate this policy at any time on or after the fifth anniversary of the policy’s effective date by paying a cancellation fee.

Approximately $1.02 trillion in outstanding UPB loans from the single-family conventional guarantee book of business were included in a credit risk transfer transaction reference pool as of June 30, 2022.

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