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Fannie Mae chalks up another Credit Insurance Risk Transfer deal 

The total insurance coverage amount for all CIRT deals to date now exceeds $19 billion

Fannie Mae has executed its fifth Credit Insurance Risk Transfer (CIRT) deal of 2022, providing up to $733.3 million in mortgage-risk coverage for the private market.

The transaction, CIRT 2022-5 involved a covered loan pool of 67,700 single-family mortgages with a total unpaid principal balance of about $21 billion. The loans in the pool are fixed-rate mortgages with mostly 30-year terms and loan-to-value ratios ranging from 80.1% to 97%, according to Fannie’s statement announcing the deal.

With the execution of CIRT 2022-5, Fannie Mae will retain risk for the first 65 basis points of loss on the $21 billion loan pool. If that $136.2 million retention layer is exhausted, then the 22 insurers and reinsurers that are party to the transaction will cover the next 350 basis points of loss on the pool, up to a maximum of $733.3 million effective as of April 1.

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

The CIRT transactions shift a portion of risk of credit losses on mortgages backed by the government-sponsored enterprises onto insurers in the private sector. 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.

CIRT offerings 1, 2, 3 and 4 each work similarly by transferring hundreds of millions of dollars of mortgage credit risk to the private sector. The covered loan pool for CIRT 2022-1 included 87,600 single-family mortgages valued at $26.1 billion. The covered loan pool for CIRT 2022-2 consisted of some 87,400 single-family mortgage loans with an outstanding unpaid principal balance of $26.5 billion. 

CIRT 2022-3 provides insurance coverage for a pool of 76,600 single-family mortgage loans with an outstanding unpaid principal balance of $23.3 billion. CIRT 2022-4 provided insurance coverage on a pool of 76,600 single-family mortgage loans with an outstanding principal balance of $23.1 billion.

In total, the five CIRT deals so far this year, after Fannie’s retention layer is tapped, provide insurance for potential losses on the covered loan pools up to a maximum of $4.2 billion. The covered mortgage loan pools in the five transactions include a total of some 396,000 mortgage loans valued at $120 billion.

“Since inception to date, Fannie Mae has acquired approximately $19.2 billion of insurance coverage on $656.6 billion of single-family loans through the CIRT program,” Fannie Mae said in the statement announcing the deal.

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