Fannie Mae transfers $771 million in credit risk to private insurers

The deal transferred millions of dollars of credit risk to a group of 22 private insurers and reinsurers. This credit risk is tied to a benchmark pool of $26.1 billion of single-family mortgages.

“This transfer of credit risk…increased the role of private capital by transferring $770.7 million of mortgage credit risk to private insurers and reinsurers,” said the Structured Finance Association declare in a brief about the agreement.

The loan pool covered for the transaction, CIRT 2002-1, comprises some 87,600 loans with loan-to-value ratios ranging from 60.01% to 80%. As part of the agreement, Fannie Mae will retain risk for the first 25 basis points of any losses on the $26.1 billion loan pool.

If this $65.3 million retention layer is tapped, the 22 insurers and reinsurers will cover the next 295 basis points of loss on the pool, up to $770.7 million. Coverage is based on actual losses over a 12.5 year term.

The aggregate amount of coverage may be reduced on the one-year anniversary of the effective date of the agreement, and each month thereafter, depending on the repayment of loans in the mortgage pool and principal amount of insured loans that become seriously delinquent. . Additionally, coverage may be terminated by Fannie Mae after five years upon payment of a termination fee.

“CIRT 2022-1 begins another active year of CIRT issuance for Fannie Mae,” said Fannie Mae Vice President of Capital Markets Rob Schaefer. “We appreciate our continued partnership with the 22 insurers and reinsurers who have purchased coverage for this agreement,”

At the end of 2021, some $750 billion of Fannie Mae-backed single-family mortgages were included in a reference pool for a credit risk transfer transaction.

Fannie Mae has accelerated its credit risk transfer mechanisms in recent months. The GSE said it expects to do $15 billion in CRT deals in 2022. In early February, HousingWire reported that Fannie Mae unveiled its second CRT deal of 2022, a $1.2 billion ticket offering. through its Connecticut Avenue Securities real estate investment conduit.

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