Credit risk

Fannie Mae Completes $ 1.2 Billion Credit Risk Transfer


U.S. government-sponsored firm Fannie Mae completed its final Credit Risk Transfer (CRT) of 2021, covering $ 30.7 billion in outstanding principal balance (UPB) from fixed-rate loans with a initial term generally of 30 years acquired from April to June 2021.

The deal transferred nearly $ 1.2 billion of mortgage credit risk to private insurers and reinsurers.

Since its inception, Fannie Mae has acquired approximately $ 15 billion in insurance coverage on $ 537 billion in single-family loans through the program, measured at the time of issuance for post-acquisition transactions (wholesale) and initials.

With CIRT 2021-2, which came into effect on October 1, 2021, Fannie Mae will retain risk for the first 65 basis points of loss on a $ 30.7 billion pool of single-family loans with loan-to-value ratios. greater than 80% and less than or equal to 97 percent.

If the $ 199.3 million retention layer is depleted, 20 insurers and reinsurers will cover the next 385 basis points of loss on the pool, up to a maximum coverage of around $ 1.18 billion.

Gallagher Re

Hedging for this transaction is provided on the basis of actual losses for a period of 12.5 years. Depending on the repayment of the insured pool and the principal amount of insured loans that become seriously past due, the total amount of coverage may be reduced on the one year anniversary and each month thereafter.

Rob Schaefer, Fannie Mae vice president of credit improvement strategy and management, said: “CRT 2021-2 has transferred the largest amount of mortgage credit risk through a single CRT transaction since the launch of the program in 2014.

“We appreciate our continued partnership with the 20 insurers and reinsurers who have purchased coverage for this agreement. “

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