Credit risk

Fannie Mae transfers $700 million of mortgage credit risk to re/insurers

Fannie Mae announced the transfer of $700 million of mortgage credit risk to private reinsurers through its Credit Insurance Risk Transfer (CIRT) Program 2022-9, as part of its ongoing efforts to reduce the risk of taxpayers by increasing the role of private capital in the mortgage market.

Rob Schaefer, Fannie Mae Vice President for Capital Markets, said, “We appreciate our continued partnership with the 23 insurers and reinsurers who have committed to underwrite coverage for this agreement.

Since inception, Fannie-Mae says it has acquired approximately $22 billion in insurance coverage on $730 billion in single-family loans through the CIRT program, measured at time of issuance for post-acquisition transactions (roughly) and initials. This latest CIRT transaction is the ninth of 2022.

The covered loan pool for CIRT 2022-9 consists of about 69,000 single-family mortgages with an outstanding principal balance of about $21 billion, Fannie Mae said.

The hedged portfolio includes guarantees with loan-to-value ratios of 60% to 80% acquired in October 2021.

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She adds that the loans included in this transaction are fixed rate mortgages, generally with a term of 30 years, fully amortizable and were underwritten under enhanced credit standards and risk controls.

With CIRT 2022-9, Fannie Mae will retain risk for the first 55 basis points of loss on the $21 billion covered loan pool. If the $115 million retention layer is depleted, 23 insurers and reinsurers will cover the next 335 basis points of loss out of the pool, up to a maximum coverage of $700 million.

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