Fannie Mae Executes Credit Insurance Risk Transfer Transaction on $19 Billion of Single-Family Loans

Rhea-AI Summary

Fannie Mae (OTCQB: FNMA) announced its sixth Credit Insurance Risk Transfer™ (CIRT™) transaction for 2022, transferring $725 million of mortgage credit risk to private insurers. This move aims to reduce taxpayer risk and enhance private capital in the mortgage market. Since the program's inception, Fannie Mae has secured approximately $19.9 billion in insurance coverage on $675.9 billion of loans. The transaction includes a pool of about 63,000 single-family loans with an outstanding balance of $19.3 billion. Fannie Mae retains risk for the first 55 basis points of loss on this pool.

Positive

• Successfully transferred $725 million in mortgage credit risk, reducing taxpayer exposure.
• Continued accumulation of insurance coverage totaling approximately $19.9 billion since the program's inception.
• Increased collaboration with 24 insurers and reinsurers, enhancing market confidence.

Negative

• None.

WASHINGTON, June 13, 2022 /PRNewswire/ -- Fannie Mae (OTCQB: FNMA) announced today that it has executed its sixth Credit Insurance Risk Transfer™ (CIRT™) transaction of 2022. As part of Fannie Mae's ongoing effort to reduce taxpayer risk by increasing the role of private capital in the mortgage market, CIRT 2022-6 transferred $725 million of mortgage credit risk to private insurers and reinsurers. Since inception to date, Fannie Mae has acquired approximately $19.9 billion of insurance coverage on $675.9 billion of single-family loans through the CIRT program, measured at the time of issuance for both post-acquisition (bulk) and front-end transactions.

"We appreciate our continued partnership with the 24 insurers and reinsurers that have committed to write coverage for this deal," said Rob Schaefer, Fannie Mae Vice President for Capital Markets.

The covered loan pool for CIRT 2022-6 consists of approximately 63,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $19.3 billion. The covered pool includes collateral with loan-to-value ratios of 60.01 percent to 80.00 percent acquired between August 2021 and September 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 2022-6, which became effective May 1, 2022, Fannie Mae will retain risk for the first 55 basis points of loss on the $19.3 billion covered loan pool. If the $106.3 million retention layer is exhausted, 24 insurers and reinsurers will cover the next 375 basis points of loss on the pool, up to a maximum coverage of $725 million.

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 canceled 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 $906 billion 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.

To promote transparency and to help insurers and reinsurers evaluate the CIRT program, Fannie Mae provides ongoing, robust disclosure data, as well as access to news, resources, and analytics through its credit risk transfer webpages. This includes Fannie Mae's innovative Data Dynamics^® tool that enables market participants to interact with and analyze both CIRT deals that are currently outstanding in the market and Fannie Mae's historical loan dataset. For more information on individual CIRT transactions, including pricing, please visit our Credit Insurance Risk Transfer webpage.

About Fannie Mae
Fannie Mae advances equitable and sustainable access to homeownership and quality, affordable rental housing for millions of people across America. We enable the 30-year fixed-rate mortgage and drive responsible innovation to make homebuying and renting easier, fairer, and more accessible. To learn more, visit:

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SOURCE Fannie Mae

FAQ

What is Fannie Mae's recent CIRT transaction about?

Fannie Mae executed its sixth CIRT transaction of 2022, transferring $725 million of mortgage credit risk to private insurers.

How much mortgage credit risk has Fannie Mae transferred in its CIRT program?

Since its inception, Fannie Mae has secured approximately $19.9 billion in insurance coverage through the CIRT program.

What is the size of the loan pool involved in CIRT 2022-6?

The covered loan pool for CIRT 2022-6 consists of approximately 63,000 loans with an outstanding principal balance of about $19.3 billion.

What is the impact of the CIRT transaction on taxpayer risk?

The CIRT transaction helps reduce taxpayer risk by increasing the role of private capital in the mortgage market.

When did CIRT 2022-6 become effective?

CIRT 2022-6 became effective on May 1, 2022.