Fannie Mae completes fifth credit insurance risk transfer of year

Fannie Mae has executed its fifth credit insurance risk transfer (CIRT) of 2022.

Fannie MaeThe bank said that the transfer was part of its ongoing effort to reduce taxpayer risk by increasing the role of private capital in the mortgage market, CIRT 2022-5 transferred $733.3m of mortgage credit risk to private insurers and reinsurers.

Since inception to date, Fannie Mae has acquired approximately $19.2bn of insurance coverage on $656.6bn of single-family loans through the CIRT program, measured at the time of issuance for both post-acquisition (bulk) and front-end transactions.

Rob Schaefer, vice president for capital markets at Fannie Mae, said: “We appreciate our continued partnership with the 22 insurers and reinsurers that have committed to write coverage for this deal.”

The covered loan pool for CIRT 2022-5 consists of approximately 67,700 single-family mortgage loans with an outstanding unpaid principal balance of approximately $21bn. The covered pool includes collateral with loan-to-value ratios of 80.01 percent to 97.00 percent acquired between October 2021 and December 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 2022-5, which became effective April 1, 2022, Fannie Mae will retain risk for the first 65 basis points of loss on the $21bn covered loan pool. If the $136.2m retention layer is exhausted, 22 insurers and reinsurers will cover the next 350 basis points of loss on the pool, up to a maximum coverage of $733.3m.

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 cancelled by Fannie Mae at any time on or after the five-year anniversary of the effective date by paying a cancellation fee.

As of March 31, 2022, approximately $906bn 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.

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