Fannie Mae has wrapped up its fourth Credit Insurance Risk Transfer (CIRT) deal of the year, transferring nearly $845 million in mortgage credit risk to a group of private insurers and reinsurers.
The transaction, CIRT 2022-4, involved a pool of 76,600 single-family mortgage loans with an outstanding principal balance of $23.1 billion.
Fannie Mae will retain risk for the first 45 basis points of any loss on the $23.1 billion loan pool. If that $104.2 billion retention layer is tapped out, then the 22 insurers and reinsurers that are party to the transaction will cover the next 365 basis points of loss on the pool, up to a maximum of $844.8 million.
“We appreciate our continued partnership with the 22 insurers and reinsurers that have committed to write coverage for this deal,” said Rob Schaefer, Fannie Mae’s vice president for capital markets.
The CIRT transactions are part of Fannie Mae’s ongoing efforts to reduce taxpayer risk by transferring it to the private capital market. The coverage terms for this latest CIRT deal, like the other deals so far in 2022, is based on actual losses for a term of 12.5 years. Fannie Mae can cancel the coverage on each deal after five years by paying a cancellation fee.
The initial deal of 2022, CIRT 2022-1, also transferred millions of dollars of credit risk to a group of private insurers and reinsurers. That credit risk is tied to a $26.1 billion pool of single-family mortgages.
The Decision Tree That Is The MBS Market
Many factors influence this decision to move from cash to MBS, including increased gain on sale opportunities driven by specified pool pay-ups. This white paper will discuss the MBS market and how lenders can use big data to compare loan prepayment performance.
Presented by: Refinitiv
As part of that initial deal, Fannie Mae retained risk for the first 25 basis points of any loss on the $26.1 billion reference loan pool. If that $65.3 million retention layer is exhausted, then the 22 insurers and reinsurers will cover the next 295 basis point of loss on the pool, up to $770.7 million.
CIRT offerings 2 and 3 work similarly. The covered loan pool for CIRT 2022-2 consists of some 87,400 single-family mortgage loans with an outstanding unpaid principal balance of $26.5 billion. The covered loan pool for CIRT 2022-3 involves 76,600 single-family mortgage loans with an outstanding unpaid principal balance of $23.3 billion.
“Since inception to date, Fannie Mae has acquired approximately $18.4 billion of insurance coverage on $635.6 billion of single-family loans through the CIRT program…,” Fannie Mae said in a statement announcing the execution of its fourth CIRT deal of the year.
