Fannie Mae has executed two new Credit Insurance Risk Transfer (CIRT) deals — the seventh and eighth of 2022 — dubbed CIRT 2022-7 and CIRT 2022-8.
The two transactions convey a combined $1 billion in mortgage credit risk to private insurers and re-insurers as part of the agency’s ongoing effort to share risk with the private sector.
Since the CIRT program’s inception in 2013 to date, Fannie Mae has acquired some $21 billion in insurance coverage on a total of $709 billion of single-family loans, Fannie Mae states in the announcement of the latest CIRT deals.
“We appreciate our continued partnership with the 24 insurers and reinsurers that have committed to write coverage for these deals,” said Rob Schaefer, Fannie Mae’s vice president for capital markets.
Through the CIRT transaction, a portion of the credit risk on mortgages backed by Fannie Mae is shifted to insurers in the private sector. The agency pays monthly premiums in exchange for insurance coverage on a portion of the designated reference loan pools.
CIRT 2022-7 involves a covered loan pool composed of 64,000 single-family mortgages with a total unpaid principal balance of about $19.8 billion. The loans in the pool are fixed-rate mortgages with primarily 30-year terms and loan-to-value ratios ranging from 60.01% to 80% that were acquired by the agency in September 2021, according to Fannie’s statement announcing the deal.
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With CIRT 2022-7, effective as of June 1, Fannie Mae will retain risk for the first 55 basis points of loss on the $19.8 billion loan pool. If that $109 billion retention layer is exhausted, then the 24 insurers and reinsurers that are party to the transaction will cover the next 335 basis points of loss on the pool, up to a maximum of $664 million.
CIRT 2022-8 involves a covered loan pool composed of 43,000 single-family mortgages with a total unpaid principal balance of about $12.9 billion. The loans in the pool also are fixed-rate mortgages with primarily 30-year terms and loan-to-value ratios ranging from 80.01% to 97% that were acquired by the agency between August and September 2021, according to Fannie’s statement announcing the deal.
The transaction also is effective as of June 1, with Fannie Mae retaining risk for the first 65 basis points of loss on the $12.9 billion loan pool. If that $84 billion retention layer is exhausted, then the 19 insurers and reinsurers that are party to the transaction will cover the next 275 basis points of loss on the pool, up to a maximum of $354 million.
CIRT transactions 1, 2, 3, 4, 5 and 6 — executed this year — work similarly to CIRTs 7 and 8, with each transferring hundreds of millions of dollars of mortgage credit risk to the private sector.
In total, the eight CIRT deals so far this year provide insurance for potential losses on the covered loan pools up to a maximum of some $5.9 billion. The covered mortgage loan pools in the eight transactions to date include a total of some 566,000 mortgage loans valued at $172 billion — based on a tally of the announced CIRT deals.