GSE transfers nearly $2 billion of mortgage credit risk to insurers


Fannie Mae has announced the execution of its second and third Credit Insurance Risk Transfer (CIRT) transactions of 2022.

As part of Fannie Mae’s ongoing efforts to reduce taxpayer risk by increasing the role of private capital in the mortgage market, CIRT 2022-2 and CIRT 2022-3 together transferred $1.8 billion of risk from mortgage credit to private insurers and reinsurers.

Since its inception, Fannie Mae has acquired nearly $17.6 billion in insurance coverage on $612 billion in single-family loans through the CIRT program, measured at the time of issuance for post-acquisition and initial transactions.

“We appreciate our continued partnership with the 25 insurers and reinsurers who have committed to underwrite coverage for these two agreements,” said Rob Schaefer, Fannie Mae vice president for capital markets.

The covered loan pool for CIRT 2022-2 consists of approximately 87,400 single-family mortgages with an outstanding principal balance of approximately $26.5 billion. The covered pool includes guarantees with loan-to-value ratios of 60.01% to 80.00%, which were acquired between April 2021 and June 2021. The covered loan pool for CIRT 2022-3 consists of approximately 76,600 single-family mortgages with an outstanding outstanding principal balance of approximately $23.3 billion. The hedged portfolio includes collateral with a loan-to-value ratio greater than 80% and less than or equal to 97%, which was acquired between July 2021 and September 2021. The loans included in both transactions are at fixed rates, generally at 30 years. fully amortizing term mortgage loans and were underwritten under rigorous credit standards and enhanced risk controls.

With CIRT 2022-2, which became effective February 1, 2022, Fannie Mae will retain risk for the first 25 basis points of loss on the $26.5 billion covered loan pool. If the $66.3 million retention layer is depleted, 22 insurers and reinsurers will cover the next 335 basis points of loss out of the pool, up to a maximum coverage of approximately $889 million. With CIRT 2022-3, which also went into effect on February 1, 2022, Fannie Mae will retain risk for the first 65 basis points of loss on the $23.3 billion Covered Loan Pool. If the $151.6 million retention layer is depleted, 23 insurers and reinsurers will cover the next 385 basis points of loss out of the pool, up to a maximum coverage of approximately $898 million.

The coverage of this transaction is based on actual losses for a period of 12.5 years. Depending on the repayment of the insured pool and the principal amount of insured loans that become seriously delinquent, the aggregate coverage amount may be reduced on the one-year anniversary and monthly thereafter. Coverage for each transaction may be canceled by Fannie Mae at any time after the fifth anniversary of the effective date by paying a cancellation fee.

As of December 31, 2021, $750 billion of UPB’s outstanding loans in our single-family conventional collateral business portfolio have been included in a reference pool for a credit risk transfer transaction.

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