Fannie Mae completed two Credit Insurance Risk Transfer transactions for almost $30 billion.
CIRT 2019-1 and CIRT 2019-2, which together cover $29.7 billion in unpaid principal balance of 21-year to 30-year original-term, fixed-rate loans, are part of Fannie Mae's ongoing effort to increase the role of private capital and reduce taxpayer risk in the mortgage market. To date, Fannie Mae has acquired about $8.9 billion of insurance coverage on $345 billion of single-family loans through the CIRT program.
"Twenty insurers and reinsurers provided coverage on these two CIRT transactions. CIRT 2019-1 and 2019-2 together covered the largest combined pool of loans and provided us the most coverage that we have ever acquired through CIRT at one time,” said Rob Schaefer, vice president for credit enhancement strategy and management at Fannie Mae. “These two transactions also marked the first time that the CIRT structure has covered the modification costs related to loan workouts, similar to the coverage that has been provided through our Connecticut Avenue Securities.”
In CIRT 2019-1, Fannie Mae will retain risk for the first 60 basis points of loss on a $11.8 billion pool of single-family loans with loan-to-value ratios greater than 60 percent and less than or equal to 80 percent.
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If the $70.6 million retention layer is exhausted, reinsurers will cover the next 325 basis points of loss on the pool, up to a maximum coverage of approximately $382 million. With CIRT 2019-2 Fannie Mae will retain risk for the first 60 basis points of loss on a $17.9 billion pool of single-family loans with loan-to-value ratios greater than 80 percent. If the $107 million retention layer is exhausted, reinsurers will cover the next 325 basis points of loss on the pool, up to a maximum coverage of approximately $582 million.
Coverage for these deals is provided based upon actual losses for a term of 10 years. Depending on the pay down of the insured pool and the principal amount of insured loans that become seriously delinquent, the aggregate coverage amount may be reduced at the one-year anniversary and each month thereafter. The coverage on each deal may be canceled by Fannie Mae at any time on or after the five-year anniversary of the effective date by paying a cancellation fee.
The covered loan pool for the CIRT 2019-1 and CIRT 2019-2 transactions consist of fixed-rate loans that were acquired by Fannie Mae from April 2018 through November 2018.
