Fannie Mae completes fourth credit insurance risk transfer of 2022

Fannie Mae’s latest credit insurance risk transfer deal is its fourth transaction of this type it has announced in the last two months, following a year when it was basically out of the market.

The newest deal, CIRT 2022-4 transferred $844.8 million of mortgage credit risk to a group of 22 private insurers and reinsurers.

The covered loan pool consists of approximately 76,600 single-family mortgages with an outstanding unpaid principal balance of approximately $23.1 billion, loan-to-value ratios between 60.01% and 80% that Fannie Mae acquired between June 2021 and August 2021.

Fannie Mae retains the risk for the first 45 basis points of loss on the covered loan pool. If the $104.2 million retention layer is exhausted, those insurers and reinsurers will cover the next 365 bps of loss, up to a maximum of $844.8 million.

Coverage is provided based upon actual losses for a term of 12.5 years. Depending on the amount of mortgages making up the insured pool that pay down the balance, along with the principal amount of insured loans that become seriously delinquent, the aggregate coverage may be reduced at the first anniversary and each month thereafter. Fannie Mae can cancel coverage on this deal at any time on or after five years by paying a cancellation fee.

On Feb. 28, Fannie Mae announced its first CIRT deal of the year covering $26 billion in unpaid principal balance. Then on March 22, it announced two deals, one covering $26.5 billion and the other for $23.3 billion.

For all of 2021, Fannie Mae did just two CIRT deals, as the company stopped all credit risk transfer activity between March 2020 and October 2021, at first because of pandemic-related disruptions to the capital markets. But changes to the GSE capital framework instituted by former Federal Housing Financial Agency Director Mark Calabria kept Fannie Mae on the sidelines until current acting Director Sandra Thompson announced she was considering making revisions.

Four Connecticut Avenue Securities REMIC deals have been issued this year as well, the most recent being for $1.1 billion announced on April 5.

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. At the end of last year, $750 billion of loans in Fannie Mae’s single-family book of business were included in a reference pool for a credit risk transfer transaction.