Single-Family Credit Insurance Risk TransferTM - February 2021 The Insurance Opportunity in U.S. Mortgage Credit - Capital Markets
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Single-Family Credit Insurance Risk TransferTM The Insurance Opportunity in U.S. Mortgage Credit February 2021 © 2021 Fannie Mae.
Disclaimers Copyright© 2021 by Fannie Mae. Forward-Looking Statements. This presentation and the accompanying discussion contain a number of estimates, forecasts, expectations, beliefs, and other forward-looking statements, which may include statements regarding future benefits of investing in Fannie Mae products, future macroeconomic conditions, future actions by and plans of the Federal Reserve, Fannie Mae’s future business plans, strategies and activities and the impact of those plans, strategies and activities. These estimates, forecasts, expectations, beliefs and other forward-looking statements are based on the company’s current assumptions regarding numerous factors and are subject to change. Actual outcomes may differ materially from those reflected in these forward-looking statements due to a variety of factors, including, but not limited to, those described in “Forward-Looking Statements” and “Risk Factors” in our quarterly report on Form 10-Q for the quarter ended September 30, 2020 and our annual report on Form 10-K for the year ended December 31, 2019. Any forward-looking statements made by Fannie Mae speak only as of the date on which they were made. Fannie Mae is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements, whether as a result of new information, subsequent events, or otherwise. No Offer or Solicitation Regarding Securities. This document is for general information purposes only. No part of this document may be duplicated, reproduced, distributed or displayed in public in any manner or by any means without the written permission of Fannie Mae. The document is neither an offer to sell nor a solicitation of an offer to buy any Fannie Mae security mentioned herein or any other Fannie Mae security. Fannie Mae securities are offered only in jurisdictions where permissible by offering documents available through qualified securities dealers or banks. No Warranties; Opinions Subject to Change; Not Advice. This document is based upon information and assumptions (including financial, statistical, or historical data and computations based upon such data) that we consider reliable and reasonable, but we do not represent that such information and assumptions are accurate or complete, or appropriate or useful in any particular context, including the context of any investment decision, and it should not be relied upon as such. Opinions and estimates expressed herein constitute Fannie Mae's judgment as of the date indicated and are subject to change without notice. They should not be construed as either projections or predictions of value, performance, or results, nor as legal, tax, financial, or accounting advice. No representation is made that any strategy, performance, or result illustrated herein can or will be achieved or duplicated. The effect of factors other than those assumed, including factors not mentioned, considered or foreseen, by themselves or in conjunction with other factors, could produce dramatically different performance or results. We do not undertake to update any information, data or computations contained in this document, or to communicate any change in the opinions, limits, requirements and estimates expressed herein. Investors considering purchasing a Fannie Mae security should consult their own financial and legal advisors for information about such security, the risks and investment considerations arising from an investment in such security, the appropriate tools to analyze such investment, and the suitability of such investment in each investor's particular circumstances. Fannie Mae securities, together with interest thereon, are not guaranteed by the United States and do not constitute a debt or obligation of the United States or of any agency or instrumentality thereof other than Fannie Mae. Opinions, analyses, estimates, forecasts, and other views of Fannie Mae's Economic & Strategic Research (ESR) group included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR group bases its opinions, analyses, estimates, forecasts, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular purpose. Changes in the assumptions or the information underlying these views, including assumptions about the duration and magnitude of shutdowns and social distancing, could produce materially different results. The analyses, opinions, estimates, forecasts, and other views published by the ESR group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management. 2 © 2021 Fannie Mae.
Contents
Program Overview Page 04
Reinsurance Opportunity Page 13
Historical Comparative Analysis Page 19
Investor Resources Page 29
Appendix Page 35
3 © 2021 Fannie Mae.
Program Overview © 2021 Fannie Mae.
Who We Are
We are America’s Housing Partner.
Fannie Mae sits at the very heart of the
U.S. housing industry.
We purchase qualifying mortgages from
lenders, bundle them into mortgage-
backed securities that are sold to investors,
and guarantee the timely payment of
principal and interest on those securities .
Lenders use their replenished cash to
1 in 4 single-family homes
originate new mortgages, and we use ours
to start the process again. This continuous
are financed by us.
flow of money promotes a healthy housing
market.
We partner with lenders to create home
purchase (single-family) and rental
(multifamily) opportunities for millions of
Americans across the country.
*Single Family, Approximate
5 © 2021 Fannie Mae.
Our Single-Family Business
Providing liquidity to the housing market and investment options to rates and credit
investors.
Proceeds from sale of MBS flow back to lender to fund new loans
Lender Fannie Mae MBS Interest Rate Investor
Originates loans Creates guaranteed MBS & Purchases MBS &
non-guaranteed credit assumes interest rate risk
risk securities
Delivers loans Securitizes loans.
Services loans Guarantees principal &
Pays guaranty fee interest on MBS in
exchange for guaranty fee
Credit Risk Credit Investor
Securities Purchases credit risk
securities & assumes
portion of credit risk
6 © 2021 Fannie Mae.
Our Size and Scale: Single-Family
As of June 2020, U.S. Single Family 1st Lien mortgage debt outstanding totaled The U.S. mortgage market is dominated by the 30-year Fixed-Rate Mortgage (FRM).
$10.8 trillion. Fannie Mae’s share stood at approximately $3.1 trillion, nearly 29%
$12,000
of the market. Fannie Mae MBS Issuance by Product Type
First Lien Mortgage Outstanding
Fannie Total
$10,000
1,000
$8,000 800
Billions ($)
600
(Billions)
$6,000
400
$4,000 200
0
$2,000 2013 2014 2015 2016 2017 2018 2019 2020*
$-
30-Yr FRM 15-year FRM 20-year FRM 10-year FRM Other Fixed ARM
Q1 2013 Q1 2014 Q1 2015 Q1 2016 Q1 2017 Q1 2018 Q1 2019 Q1 2020
*Source: Federal Reserve’s Flow of Funds * As of September 30, 2020
Fannie Mae was the largest issuer of single-family mortgage securities in the third We provided $933 billion in single family mortgage liquidity across the country
quarter of 2020. in the first nine months of 2020.
Q3 2020 Market Share:
Single-Family Mortgage-Related Securities Issuances Share
Private-Label Securities 2%
Ginnie Mae
23%
Fannie Mae
41%
Freddie Mac
34%
7 © 2021 Fannie Mae.
Credit Risk Transfer Overview
Program benefits: We have transferred over $66 billion in single-family
▪ Benchmark issuer credit risk to private market participants since 2013,
▪ Large, geographically diversified loan pools transferring a portion of the credit risk on
▪ Innovative credit-risk management tools
▪ Program transparency
$2.2 Trillion
of UPB at Issuance*
▪ Unique online investor tools and resources
Fannie Mae’s suite of risk sharing programs
Connecticut Avenue Credit Insurance Risk Lender risk sharing
SecuritiesTM (CAS) TransferTM (CIRTTM) vehicles
The benchmark for U.S. Attracts diversified insurers/ Customized lender risk sharing
mortgage credit reinsurers transactions
$47 billion issued since $12.2 billion of coverage $7 billion issued since program
program inception* committed since program inception*
inception*
Covering Covering over
Covering over $206 billion in UPB
$1.5 Trillion in UPB at
issuance* $470 billion in UPB at at issuance*
* Issuance amount (not outstanding UPB) through September 30, 2020 issuance*
8 © 2021 Fannie Mae.
CIRT Program Benefits and Volumes
Large, geographically diversified loan
CIRT Risk Transferred pools provide broad exposure to U.S.
3,000 housing market
Fannie Mae acts as an intermediary
2,500 between the lender and investor to set
standards, manage quality, mitigate losses,
2,000 and maximize value
$ in Millions
Ongoing, programmatic issuance and
1,500
flexible design – can cover various loan
types acquired by Fannie Mae
1,000
Transparent pricing provided on our
500 webpage for all transactions – along with
key deal documents and transaction data
0
2014 2015 2016 2017 2018 2019 2020 Powerful investor resources – including
proprietary analytical tool Data
Limit of Liability
Dynamics®
Fannie Mae has committed to transfer $12.9B of risk on over $474B of
loans under the CIRT program through September 30, 2020.
9 © 2021 Fannie Mae.Our Goal: Reducing Credit Losses Through
a Fully Digital and Secured Mortgage
Process
Improve quality and drive efficiency by using data and eliminating manual processes
throughout the entire lifecycle.
▪ EarlyCheckTM ▪ Pricing & Execution – Whole
▪ Single Source Validation Loan®/MBS®
▪ Desktop Underwriter® & ▪ Servicing Execution ToolTM
Desktop Originator®
Production Execution
▪ Servicing Marketplace
▪ Application Program Interfaces ▪ Loan Delivery
▪ Collateral Underwriter® Mortgage Technology
Platform
▪ Servicing Management Default
▪ Fannie Mae ConnectTM Insights Servicing UnderwriterTM
▪ Loan Quality ConnectTM ▪ Default Management Reporting
System
PAST FUTURE
▪ Lots of paper ▪ Reduced paper by connecting to source data
▪ Complex and manual ▪ Easier and more efficient
▪ Time consuming and costly ▪ Streamlined and automated
10 © 2021 Fannie Mae.Our Credit Risk Management Approach
Property
Lender quality Loan quality Servicing quality
management
■ Lenders undergo a ■ Loans must be ■ Fannie Mae sets loan ■ We manage all property
rigorous approval underwritten in servicing standards, acts management and
process prior to doing accordance with Fannie as Master Servicer, and disposition in house,
business with Fannie Mae guidelines. provides oversight of managing one of the
Mae and must meet loan servicers. industry’s largest real-
ongoing net worth and ■ 90%(1) of loans that we estate owned portfolios –
business operational acquire are evaluated ■ We set standards for loss disposing of over 1.8
requirements. through Desktop mitigation and borrower million homes since
Underwriter® (DU®), the workout options. Our 2009.
■ Lenders are subject to industry’s most widely proprietary servicing
ongoing oversight used automated tool, Servicing ■ Our strategy is to sell
through comprehensive underwriting system. Management Default non-distressed homes to
operational reviews to UnderwriterTM (SMDUTM), owner-occupants,
assess the effectiveness ■ 100% of Fannie Mae’s automates our servicing helping to maximize
of their quality control single family and policies. sales proceeds, stabilize
procedures. condominium neighborhoods, and
appraisals are assessed preserve the value of our
through Collateral guaranty book.
Underwriter® (CU®), our
proprietary appraisal
risk assessment tool.
(1) Approximate
11 © 2021 Fannie Mae.Credit Risk Management Highlights
Fannie Mae’s industry-leading technology drives improved loan quality and
better outcomes.
Desktop Underwriter® Collateral Underwriter®
+90%
1,900(1) 22,790+ 45 Million+
Lenders/Agents Loan deliveries in 2020 Registered Users* Appraisals collected to date
through DU®(1)
3,270+ 7.4 Million+
▪ In 1H 2020, $516 BN in UPB delivered to Fannie Mae had Registered Lenders/ Appraisals viewed by lenders since
one or more Day 1 Certainty® components Agents launch
▪ 100% of single-family and condominium appraisals go through
CU as part of our QC process
(1) Approximately 1200 lenders actively deliver loans to Fannie Mae through DU on an
annual basis. Approximately 700 additional lenders are approved for DU access. *Since January 2015
Servicing Management Default UnderwriterTM Real Estate Owned
~95% of 1-2 hours 1.8 million+
Delinquencies saved per loan with Homes disposed of since 2009
covered through automated loss mitigation (industry’s largest distressed
portfolio)
72+ Million
SMDU Users to date
▪ Over 1,000 servicers currently benefit from SMDU through B2B ▪ Best execution approach to sell real estate based on NPV
integration or through the SMDU User Interface comparison to move-in ready home sold to owner occupant
▪ Provides consistent decisioning for loss mitigation solutions ▪ 100% of REO sales managed in-house: resulting in lower
costs, higher sales prices, and reduced severities
12 © 2021 Fannie Mae.Reinsurance Opportunity © 2021 Fannie Mae.
CIRT Reference Pool Selection Process
Example: 30 year, >60-80 LTV
Selection of Fully amortizing, generally 25-year and 30-year
Acquisitions fixed-rate(1), 1-4 unit, first lien, conventional
Based upon Current UPB
Not Refi Plus™ / Not HARP(2) recent covered in
Random Division acquisition Credit
period Insurance
60% < Loan-to-Value < 80% (random Risk Transfer
division) Transaction
Proportional
allocation for
CAS 0 x 30 payment history since acquisition
Other exclusions may apply
(1) All loans will have terms greater than 240 months and less than or equal to 360 months. Other minimal exclusion criteria apply.
(2) Fannie Mae acquires HARP loans under its Refi Plus™ initiative, which provides expanded refinance opportunities for eligible Fannie Mae borrowers.
14 © 2021 Fannie Mae.Reinsurance Deal Structure
Fannie Mae has Co-Beneficial Interest in Trust
Lender 1
Premium Ceded Reinsurer A
Premium Paid Interests &
Lender 2 Liabilities
Agreement
Fannie Reinsurer B
Mae Aggregate
Lender 3 Quota Share
XOL Reinsurance
Loans Insurance Protected Cell
Contract
owned or Policy Reinsurer C
Lender 4 guaranteed
… Trust
Loss Recoveries Agreement
…
Lender X
Loss Recoveries
Loans delivered to
Reinsurer X
FNMA under
Mortgage Selling “Cut Through” Endorsement to Quota
and Servicing
Contract
Share (“QS”) Reinsurance Agreement
15 © 2021 Fannie Mae.Insurance Policy Structural Overview
Illustration
Key Features:
▪ Simple loss structure
Catastrophic losses ▪ Structured with retention layer and an aggregate limit of
(retained by Fannie Mae) liability
▪ Fannie Mae retains first loss (retention) layer
3.65%
▪ If retention layer is exhausted, reinsurers cover actual
losses up to aggregate limit of liability
3.25% aggregate limit ▪ Actual loss is determined after property disposition
of liability
▪ Limit may step down on first anniversary and monthly
(risk transferred to
thereafter depending on level of delinquencies and pool
reinsurers)
paydowns
▪ Partial collateralization of risk exposure, based upon
external ratings of reinsurer
0.40%
▪ Termination option at any time on/after Year 5 with a fee
0.40% first loss layer paid to reinsurers
(retained by Fannie Mae)
▪ “Clean up” call once covered balanceLimit of Liability Step Down
Expected Scenario - Illustration
Balance Paydown Remaining Limit (%)
▪ Step down typically
3.00% 100% begins at Month 12
following the effective
2.75%
date and monthly
2.50% thereafter
80%
2.25% ▪ Remaining limit of
liability will be reduced
2.00%
based on the paydown
UPB Outstanding (%)
Remaining Limit (%)
60% of the covered pool
1.75%
and balance of
1.50%
delinquent loans
1.25%
40% ▪ Limit step down
1.00% beneficial to reinsurers
as collateral
0.75% Termination
Option requirement declines
20%
0.50%
▪ Fannie Mae has early
0.25% termination option at
Month 60
0.00% 0%
0 12 24 36 48 60 72 84 96 108 120 132 144 150
Months Since Inception
17 © 2021 Fannie Mae.Comparison of Typical CIRT Bulk Deals
and Front-End Deals
Bulk Deal Front-End Deal
Future acquisition months (can also include
Loan Acquisitions Period 2-9 months prior to inclusion in pool
loans acquired within the last 12 months)
Fill-up Period N/A 12-15 months
Covered Loans 15-30 YR FRM 30 YR FRM
Limit % determined at the time of policy
Limit of Liability Determination At the time of policy execution execution; limit $ determined at the end of the
fill-up period
May begin 12 months following May begin 18 months following effective date
Limit of Liability Step Down
effective date and monthly thereafter and monthly thereafter
Based on competitive bids for a sample pool of
Based on competitive bids;
Monthly Premium loans, with pricing true-up at end of fill-up
locked in at time of execution
period
Follows standard eligibility; pricing based upon
Follows standard eligibility; covered
Loan Profile Restrictions an indicative reference pool; may include
loans are disclosed prior to pricing
restrictions on final risk attributes of the pool
Collateral amount due at time of Collateral posted as covered loan pool is
Reinsurer Collateral
execution delivered
18 © 2021 Fannie Mae.Historical Comparative Analysis © 2021 Fannie Mae.
Acquisition Profile
> 60-97 LTV Historical FRM30 Loan Acquisition
Profile
WA Note % % Cash- % DTI 46-
Orig Year Original UPB Rate WA FICO WA DTI WA OLTV WA OCLTV Purchase % CA WA Risk Layers1 % Investor % FICO < 680 out 502
1999-2004 $1289.6B 6.50% 712 34.8 79.0 79.6 42% 17% 0.81 4.2% 28.1% 25.8% 22.7%
2005-2008 $694.8B 6.17% 723 39.2 78.4 80.2 48% 12% 0.94 5.9% 23.4% 32.3% 32.8%
2009-2013 $1321.2B 4.41% 760 33.3 78.1 79.0 45% 24% 0.34 6.0% 3.7% 16.2% 7.6%
2014-2017 $1190.9B 4.18% 746 34.9 81.8 82.3 65% 20% 0.36 6.4% 9.2% 15.0% 5.7%
2018-2019 $733.2B 4.48% 745 37.1 82.8 83.0 67% 17% 0.53 5.2% 12.6% 15.1% 20.4%
Q1-Q3 2020³ $495.4B 3.40% 755 34.6 80.8 81.0 45% 17% 0.35 3.9% 4.1% 14.3% 12.4%
CAS/CIRT Eligible Loan Acquisition Profile
Original WA Note % Cash- % DTI 46-
Orig Quarter UPB Rate WA FICO WA DTI WA OLTV WA OCLTV % Purchase % CA WA Risk Layers1 % Investor % FICO < 680 out 502
1Q2019 $54.5B 4.81% 742 37.8 83.6 83.8 72% 17% 0.51 5.5% 9.1% 15.3% 21.5%
2Q2019 $97.9B 4.43% 747 36.9 83.8 84.0 71% 16% 0.43 4.4% 7.3% 12.4% 18.6%
3Q2019 $127.0B 4.02% 751 36.0 82.3 82.6 56% 18% 0.39 3.6% 5.6% 13.6% 16.2%
4Q2019 $106.0B 3.94% 751 36.0 81.1 81.4 49% 20% 0.42 4.1% 5.0% 17.3% 15.8%
1Q2020 $129.0B 3.76% 753 35.5 80.9 81.1 44% 20% 0.41 4.4% 4.6% 17.2% 14.4%
2Q2020 $209.0B 3.40% 756 34.3 80.4 80.7 38% 18% 0.34 3.2% 3.8% 14.8% 11.8%
3Q2020 $228.7B 3.10% 757 34.4 80.5 80.7 48% 19% 0.32 3.9% 4.2% 12.5% 11.7%
Only loans with LTV between 60-97 are included. Excludes loans with CLTV >97
Statistics weighted by origination UPB
1Risk Layers defined as: Investor Property, DTI 46-50 (rounded to the nearest integer), FICOAcquisition Profile
60.01-80.00 LTV CAS/CIRT Eligible Loan Acquisition Profile
Orig Date Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20
Original UPB ($M) $ 18,709 $ 21,246 $ 23,631 $ 23,193 $ 23,766 $ 22,629 $ 22,523 $ 34,597 $ 56,906 $ 58,230 $ 63,722 $ 64,917 $ 78,888 $ 69,145
WA Note Rate 4.1% 4.0% 3.9% 3.9% 3.9% 3.9% 3.9% 3.8% 3.5% 3.4% 3.4% 3.3% 3.2% 3.0%
WA FICO 753 754 757 755 753 753 752 756 759 761 762 763 764 765
WA DTI 35.3% 35.0% 34.4% 34.8% 35.2% 35.4% 35.5% 34.8% 33.8% 33.2% 33.2% 33.2% 33.2% 33.0%
WA OLTV 69.6% 69.3% 68.8% 68.2% 68.5% 68.2% 68.1% 68.3% 68.0% 67.3% 66.6% 66.7% 66.7% 66.5%
WA CLTV 70.0% 69.8% 69.2% 68.7% 69.0% 68.7% 68.6% 68.7% 68.4% 67.9% 67.3% 67.4% 67.3% 67.0%
% Purchase 47.3% 41.9% 32.7% 32.0% 32.9% 32.0% 29.0% 26.6% 22.9% 17.7% 17.9% 23.4% 26.0% 26.8%
% CA 20.4% 21.5% 23.2% 22.5% 23.3% 24.6% 25.4% 26.9% 26.6% 25.9% 27.3% 28.3% 28.7% 29.6%
WA Risk Layers1 0.57 0.55 0.52 0.56 0.59 0.61 0.64 0.59 0.50 0.48 0.46 0.43 0.43 0.42
% Investor 7.5% 6.9% 6.2% 6.7% 6.5% 7.0% 7.2% 7.5% 6.5% 5.2% 5.3% 5.1% 6.1% 6.5%
% FICO < 680 7.1% 6.3% 5.3% 5.8% 6.0% 6.4% 6.6% 5.6% 4.6% 4.0% 4.0% 4.0% 4.1% 3.8%
% Cashout 26.0% 26.3% 27.3% 29.4% 31.7% 32.1% 34.4% 31.8% 27.1% 27.1% 26.1% 22.7% 20.9% 20.8%
%DTI 46-50 16.4% 15.4% 13.9% 14.6% 15.5% 16.1% 15.8% 14.3% 12.3% 11.5% 11.3% 11.6% 11.5% 11.2%
80.01-97.00 LTV CAS/CIRT Eligible Loan Acquisition Profile
Orig Date Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20
Original UPB ($M) $ 13,020 $ 13,093 $ 12,662 $ 11,353 $ 11,731 $ 11,199 $ 10,947 $ 16,589 $ 25,360 $ 23,611 $ 25,154 $ 27,285 $ 31,093 $ 25,648
WA Note Rate 4.1% 4.0% 3.9% 3.9% 3.9% 3.9% 3.9% 3.8% 3.5% 3.5% 3.4% 3.3% 3.2% 3.0%
WA FICO 746 747 750 750 748 749 749 750 751 750 750 750 749 750
WA DTI 37.0% 36.7% 36.4% 36.4% 36.7% 36.8% 36.7% 36.1% 35.6% 35.5% 35.7% 35.9% 35.9% 35.9%
WA OLTV 92.6% 92.4% 91.7% 91.7% 91.7% 91.6% 91.6% 91.5% 91.2% 91.2% 91.5% 91.8% 91.7% 91.7%
WA CLTV 92.6% 92.4% 91.7% 91.7% 91.7% 91.7% 91.6% 91.5% 91.3% 91.2% 91.5% 91.8% 91.8% 91.7%
% Purchase 84.3% 80.8% 71.3% 70.9% 72.3% 72.9% 70.2% 66.8% 61.4% 58.1% 64.5% 72.3% 74.1% 76.0%
% CA 9.6% 10.1% 11.7% 10.7% 12.3% 13.5% 14.0% 13.4% 12.5% 11.5% 12.4% 12.6% 12.6% 13.3%
WA Risk Layers1 0.23 0.22 0.20 0.20 0.20 0.21 0.20 0.17 0.16 0.16 0.16 0.17 0.17 0.17
% Investor 0.2% 0.2% 0.3% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.1% 0.1% 0.1% 0.1% 0.2%
% FICO < 680 5.6% 5.4% 4.3% 4.1% 4.1% 4.3% 4.0% 3.5% 3.3% 3.5% 3.9% 4.4% 4.7% 4.8%
% Cashout 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
%DTI 46-50 17.2% 16.0% 15.2% 15.2% 15.6% 16.0% 15.8% 13.8% 12.9% 12.2% 12.2% 12.6% 12.4% 12.4%
(1) Risk Layers defined as: Investor Property, Cash-out Refinance, DTI 46-50 (rounded to the nearest integer), & FICO < 680
(2) Rounded to the nearest integer
Source: Fannie Mae Data, as of September 2020 activity date
21 © 2021 Fannie Mae.Total Mortgage Origination Volume and
FICO
Credit profile typically fluctuates with the origination cycle
▪ When origination capacity is tight, credit profile is strongest
▪ Lower origination volumes mean lenders have more capacity to underwrite to the full credit box
▪ Overall profile is heavily levered to profile of refinancings, as purchase profile is more stable
780 $450 770 $450
770 $400 765 $400
760 $350 760 $350
Total Volume in Billions
Total Volume in Billions
750 755
$300 $300
740 750
$250 $250
FICO
FICO
730 745
$200 $200
720 740
$150 $150
710 735
700 $100 730 $100
690 $50 725 $50
680 $0 720 $0
Sep-00
Sep-01
Sep-02
Sep-03
Sep-04
Sep-05
Sep-06
Sep-07
Sep-08
Sep-09
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
Sep-17
Sep-18
Sep-19
Sep-20
Sep-15
Sep-16
Sep-17
Sep-18
Sep-19
Sep-20
Dec-15
Mar-16
Dec-16
Mar-17
Dec-17
Mar-18
Dec-18
Mar-19
Dec-19
Mar-20
Jun-16
Jun-17
Jun-18
Jun-19
Jun-20
Origination Month Origination Month
Total Volume (RHS) Purchase FICO Refi FICO Average FICO Total Volume (RHS) Purchase FICO Refi FICO Average FICO
2000 – Sep 2020 2015- Sep 2020
Source: Fannie Mae. Origination estimates for aggregate market
22 © 2021 Fannie Mae.% Risk Layers for Total Acquisitions
DU Model Updates 80%
70%
60%
Dynamic Credit Management
50%
March 2018: DU 10.2 40%
▪ Revised DU’s risk assessment to limit risk layering 30%
▪ Fewer DU Approve recommendations on loans that have multiple 20%
higher-risk characteristics 10%
0%
Sep-18
Sep-19
Jul-18
Jul-19
Nov-18
May-19
Nov-19
Mar-18
May-18
Mar-19
Mar-20
May-20
Jan-18
Jan-19
Jan-20
December 2018: DU 10.3
▪ Enhanced DU’s management of multiple risk layers
0 1 2 3
▪ Six months of reserves for cash-out refinances with DTI over 45% to
address increase in high DTI acquisitions
% ≥ Risk Layers for Total Acquisitions
60%
July 2019: DU 10.3
50%
▪ Certain new loan casefiles submitted to DU will receive an Ineligible
recommendation when multiple high-risk factors are present 40%
▪ We have updated the DU eligibility assessment to better align the mix of 30%
business delivered to Fannie Mae with the composition of business in
20%
the overall market
10%
April 2020: DU 10.3 0%
Jul-18
Sep-18
Jul-19
Sep-19
Nov-18
Nov-19
Mar-18
May-18
Mar-19
May-19
Mar-20
May-20
Jan-18
Jan-19
Jan-20
▪ Revised DU’s risk and eligibility assessments to result in modest
reduction of loan casefiles with high-risk factors receiving an
Approve/Eligible recommendation ≥1 ≥2 ≥3
*Risk layers defined as Investor Property, DTI>45 (rounded to the
23 © 2021 Fannie Mae. nearest integer), FICO score < 680, and cash-out refinanceHomeReady Impact on MI Coverage
▪ The key attribute of the HomeReady® program is the lower- Historical Loan Count by Mortgage Insurance (MI) %
than-standard MI levels required for loans with LTV greater Origination Vintage
than 90%
OLTV Mi Pct 1999-2004 2005-2008 2009-2013 All
Standard MI Home Ready MI 18 3,746 1,103 205 5,054
LTV Range (%)
Coverage (%) Coverage (%)
25 371,754 117,891 44,458 534,103
91-95
95.01 – 97.00% 35.0% 25.0% 30 551,997 146,858 447,647 1,146,502
35 11,932 9,754 2,028 23,714
90.01 – 95.00% 30.0% 25.0%
18 64,384 4,250 2,077 70,711
85.01 – 90.00% 25.0% 25.0% 25 1,034 574 629 2,237
96-97
30 39,638 886 27,409 67,933
80.01 – 85.00% 12.0% 12.0%
35 79,516 25,593 43,847 148,956
Note: most loans have “standard” coverage; however, levels may
All 1,124,001 306,909 568,300 1,999,210
differ on some loans – this is disclosed on the loan-level deal file
▪ Although chart above shows MI levels that are Historical Severity by Mortgage Insurance (MI) %
considered “standard”, we have historically acquired
Origination Vintage
loans with varying levels of MI coverage
OLTV Mi Pct 1999-2004 2005-2008 2009-2013 All
▪ The chart below shows the monthly HomeReady (HR) 18 28.1% 30.7% 11.7% 29.0%
Loan Volume since it’s inception in 2016
25 22.3% 27.3% 15.1% 25.2%
91-95
Monthly HomeReady Loan Volume 30 20.5% 27.0% 10.8% 23.6%
$6 35%
35 23.9% 19.9% 5.4% 20.6%
HomeReady Volume ($B)
$5 30%
% HomeReady
$4 25% 18 25.0% 43.9% 11.3% 31.4%
20% 25
$3 20.8% 20.5% 4.9% 20.3%
15% 96-97
$2 10%
30 20.2% 33.7% 5.0% 20.3%
$1 5% 35 22.2% 22.3% 5.8% 22.1%
$- 0% All 21.5% 26.9% 11.2% 24.0%
Sep-16
Sep-17
Sep-18
Sep-19
Sep-20
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
May-16
May-17
May-18
May-19
May-20
% HR UPB HR Source: Fannie Mae Single Family March 2020 Data Release
24 © 2021 Fannie Mae. Light blue cells indicate standard MI% for respective OLTV bucket, while orange cells indicate
HomeReady MI%Historical Loss Performance
Comped Loss of CIRT 2020-1 (>60-80 LTV) Across Vintage Years
Net Loss Rate Pipeline Loss Rate Terminal DLQ Loss Rate Mod Cost Rate
4.5%
4.0%
3.5% Limit of Liability Detach: 3.35%
Loss as a % of Origination UPB
3.0%
2.5%
2.0%
1.5%
1.0%
0.5% Retention Detach: 0.35%
0.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
▪ Bars reflect historical cumulative loss performance re-weighted to the CIRT 2020-1 profile across FICO/CLTV/Risk Layer distribution.
▪ Pipeline loss rate is equal to 25% of the pipeline loss re-weighted across the FICO/CLTV/Risk Layer distribution. Pipeline loss is defined
as the sum of defaulted UPB on foreclosed loans that have not been disposed and the last UPB for loans that were in D180+
delinquency as of the last activity period.
▪ Terminal DLQ Loss Rate is the historical cumulative loss performance for loans in the origination vintage that were reported as
delinquent in the 150th month since origination (note: loss performance excludes loans that cured after month 150, but still resulted in
a credit event).
Source: Fannie Mae Data Dynamics. www.fanniemae.com/DataDynamics
25 © 2021 Fannie Mae.Historical Loss Performance
>60-80 LTV Total Loss Re-Weighted to 2006 Performance.
Dots reflect historical total loss performance re-weighted to all CIRT profiles across
FICO/CLTV/Risk Layer distribution
Retained First Loss Limit of Liability Total Loss Rate
5.0%
4.5%
4.0%
Loss Rate as % of Origination UPB
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
CIRT 2015-3
CIRT 2015-1
CIRT 2015-2
CIRT 2016-1
CIRT 2016-2
CIRT 2016-3
CIRT 2016-7
CIRT 2016-8
CIRT 2017-1
CIRT 2017-2
CIRT 2017-5
CIRT 2017-6
CIRT 2018-1
CIRT 2018-4
CIRT 2018-5
CIRT 2019-1
CIRT 2019-3
CIRT 2020-1
Note: Total Loss Rate is the aggregate loss rate or the loss rate estimated over the term of the CIRT deal
Source: Fannie Mae Data Dynamics. www.fanniemae.com/DataDynamics
26 © 2021 Fannie Mae.Loan Performance Compared to 2001 Vintage
CIRT deals through March 31, 2020 had initially been outperforming the strong 2001 vintage until the onset of the
2020 COVID pandemic, which has increased delinquency rates but not yet resulted in material actual losses.
CIRT Low LTV (61-80 LTV) Ever D90 Performance CIRT High LTV (81-97 LTV) Ever D90 Performance
7.0%
6.0%
6.0%
5.0%
Ever D90/Original UPB
5.0%
Ever D90/Original UPB
4.0%
4.0%
3.0%
3.0%
2.0%
2.0%
1.0%
1.0%
0.0%
0.0%
0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60
0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60
Seasoning (Months since Origination)
Seasoning (Months since Origination)
2001 CIRT 2015-1 CIRT 2015-2 2001 CIRT 2015-4 CIRT 2015-5
CIRT 2015-3 CIRT 2016-1 CIRT 2016-2 CIRT 2016-1 FE CIRT 2016-4 CIRT 2016-5
CIRT 2016-3 CIRT 2016-7 CIRT 2016-8 CIRT 2016-6 CIRT 2017-2 FE CIRT 2017-3
CIRT 2017-1 CIRT 2017-1 FE CIRT 2017-2 CIRT 2017-4 CIRT 2018-2 CIRT 2018-2 FE
CIRT 2017-5 CIRT 2017-6 CIRT 2018-1
CIRT 2018-3 CIRT 2018-6 CIRT 2018-7
CIRT 2018-1 FE CIRT 2018-4 CIRT 2018-5
CIRT 2019-2 CIRT 2019-2 FE CIRT 2019-4
CIRT 2019-1 CIRT 2019-1 FE CIRT 2019-3
CIRT 2020-1 CIRT 2020-1 FE 2001 Comped CIRT 2020-2 CIRT 2020-2 FE 2001 Comped
▪ “Ever” D90 Performance reflects the unpaid principal balance of all covered loans when they first become 90 day delinquent, divided by the initial balance of the covered pool.
▪ “Comped” line represents 90-day delinquency performance of 2001 acquisitions after removing loans that became delinquent within 6 months of origination and re-weighting the actual experience to the
CIRT 2020-1 and 2020-2 profiles across FICO/CLTV/Risk Layer distribution. Risk layers defined as Investor Property, DTI>46 (rounded to the nearest integer), single borrower, and cash-out refinance.
▪ The colored lines reflect the actual performance of the CIRT deals to date.
27 © 2021 Fannie Mae.Loan Performance– Harvey, Irma, Maria,
Florence, and Michael Removed
CIRT deals through March 31, 2020 had initially been outperforming the strong 2001 vintage until the onset of the
2020 COVID pandemic, which has increased delinquency rates but not yet resulted in material actual losses.
CIRT Low LTV (61-80 LTV) Ever D90 Performance CIRT High LTV (81-97 LTV) Ever D90 Performance
6.0% 7.0%
5.0% 6.0%
Ever D90/Original UPB
Ever D90/Original UPB
4.0% 5.0%
4.0%
3.0%
3.0%
2.0%
2.0%
1.0%
1.0%
0.0%
0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 0.0%
0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60
Seasoning (Months since Origination)
Seasoning (Months since Origination)
2001 CIRT 2015-1 CIRT 2015-2 CIRT 2015-3
2001 CIRT 2015-4 CIRT 2015-5 CIRT 2016-1 FE
CIRT 2016-1 CIRT 2016-2 CIRT 2016-3 CIRT 2016-7
CIRT 2016-4 CIRT 2016-5 CIRT 2016-6 CIRT 2017-2 FE
CIRT 2016-8 CIRT 2017-1 CIRT 2017-1 FE CIRT 2017-2
CIRT 2017-3 CIRT 2017-4 CIRT 2018-2 CIRT 2018-2 FE
CIRT 2017-5 CIRT 2017-6 CIRT 2018-1 CIRT 2018-1 FE
CIRT 2018-3 CIRT 2018-6 CIRT 2018-7 CIRT 2019-2
CIRT 2018-4 CIRT 2018-5 CIRT 2019-1 CIRT 2019-1 FE
CIRT 2019-2 FE CIRT 2019-4 CIRT 2020-2 CIRT 2020-2 FE
CIRT 2019-3 CIRT 2020-1 CIRT 2020-1 FE 2001 Comped
2001 Comped
▪ “Ever” D90 Performance reflects the unpaid principal balance of all covered loans when they first become 90 day delinquent, divided by the initial balance of the covered pool.
▪ “Comped” line represents 90-day delinquency performance of 2001 acquisitions after removing loans that became delinquent within 6 months of origination and re-weighting the actual experience to the CIRT
2019-1 and 2019-2 profiles across FICO/CLTV/Risk Layer distribution. Risk layers defined as Investor Property, DTI>46 (rounded to the nearest integer), single borrower, and cash-out refinance.
▪ The colored lines reflect the actual performance of the CIRT deals to date.
28 © 2021 Fannie Mae.Investor Resources © 2021 Fannie Mae.
COVID-19 Investor Resources
Fannie Mae remains committed to helping market participants easily access the
investor resources and communications related COVID-19.
Investor Resources Presentations
Webpage focused on COVID-19 View updates on enhanced
Investor resources including analytical capabilities as well as
FAQs, announcements, and insights into forbearance,
Lender Letters. delinquency and resolution
patterns.
Visit the site.
Access the presentation
Commentary and News Data Dynamics Enhancements
Searchable repository of all New dashboards to view
news and announcements performance of loans in
impacting CRT investors. temporary payment forbearance
or modification, and analyze
Read more. historical outcomes for those
loans. View user guide.
Sign up to receive the latest news and insights via email
30 © 2021 Fannie Mae.Historical loan-level performance data
Gain insights into historical performance trends and relationships to credit
performance via our dataset
Access our historical monthly loan performance data on a portion of our single-family mortgage loans
▪ Includes a subset of our 30-year and less, fully amortizing, full documentation, conventional fixed-rate mortgage
acquisitions since January 2000
▪ Updated on a quarterly basis to include a new quarter of acquisitions and performance
▪ Inclusive of loans modified through HARP®, supporting market analysis of high loan-to-value refinance assistance
programs
Key features:
• Utilize Data Dynamics to see aggregated
loan-level data
• Download the entire dataset with one-
click, capturing over 50 data elements per
loan
• Self-serve with abundant investor
resources including file layout, glossary,
FAQs, web tutorials, and statistical
summaries to support download of
dataset
• Multifamily Loan Performance Data has
been added in August 2019
www.fanniemae.com/loanperformance
31 © 2021 Fannie Mae.CIRT Loan-Level Data Disclosure
■ Fannie Mae makes over 100 loan-level disclosure fields available to support CIRT analysis
■ Fields include key loan risk factors, loan term characteristics, collateral characteristics, servicing data, and disposition
data, such as (not limited to):
HomeReady Program Indicator, and High Loan-to-Value Refinance
Property Type
First Time Home Buyer Indicator Indicator
Loan and Borrower
Characteristics Borrower FICO and Co-Borrower
Number of Borrowers Original Debt to Income Ratio FICO scores (at origination, deal
issuance, and ongoing)
Original Loan to Value Ratio (LTV)
Collateral Number of Units Three digit zip code
and Combined LTV Ratio (CLTV)
Characteristics
Property Inspection Waiver
Occupancy Type Metropolitan Statistical Area
Flag(1)
Reason and Date as to why a loan
Servicer Name Loan Payment History
Servicing Data balance went to zero
Mortgage Insurance
Modification Flag Current Loan Delinquency Status
Cancellation Indicator
Loan Term Original and Current Interest Rate Original Loan Term Loan Age
Characteristics
Original and Current UPB Origination Date Maturity Date
Last Paid Installment Date Foreclosure Date Detailed Proceed Fields
Disposition Data
Original and Current List Price
Disposition Date Detailed Expense Fields
and Date
(1) Available beginning with CIRT 2017-7 and forward
32 © 2021 Fannie Mae.Data Dynamics®
The only free platform that allows investors to gain insights into historical loan
performance trends, issuance profiles, and monthly performance – exclusively for
Fannie Mae’s CAS and CIRT programs.
NEW:
• Forbearance & Modification Dashboards: enables users to access
snapshots of performance on active population of loans in temporary
payment forbearance or modification
▪ Available 24x7 at no cost. Access at-issuance and ongoing
monthly performance data directly through new API
Access (application programming interface) functionality.
▪ Support and training via 1:1 demos, webinars, and investor
relations helpline
▪ View all CAS and CIRT data, and our historical loan
performance dataset supporting the programs
Transparency ▪ Export/download data or charts to combine with other tools
or share with portfolio managers and risk departments
▪ Unique insight into risk and performance trends through
dynamic, drillable analysis
Insights
▪ Quick access to potential impacts of events (e.g., natural
disasters)
Access today at www.fanniemae.com/datadynamics
33 © 2021 Fannie Mae.Powerful insights and capabilities
Dynamic drillable analysis enables investors to keep abreast of their investments and
emerging trends
▪ Aggregate performance of a specific portfolio
▪ Compare credit profile of a new deal to outstanding View a standardized
file for all remittance
deals months for every deal
since inception
▪ View delinquency performance of credit tails and how
loans move between states of delinquency from period Download at-issuance
to period Download and on-going file data
Functionality by date range, deal
type, or simple search
▪ Observe loan disposition characteristics and trends
▪ Analyze potential impacts of market events (e.g. natural Access the reference
disasters) pool file immediately
▪ Export data for additional analysis
▪ Drill into forbearance and modification data
▪ …and much more.
34 © 2021 Fannie Mae.Appendix © 2021 Fannie Mae.
Enterprise Paid Mortgage Insurance
(EPMI)
▪ Mortgage insurance option available for lenders in lieu of the lender acquiring borrower-paid (BPMI) or lender-paid
mortgage insurance (LPMI)
▪ Enables lenders to deliver a loan with an LTV >80% to Fannie Mae without the lender-acquired mortgage insurance, in
return for an additional loan-level price adjustment fee paid by the lender to Fannie Mae
▪ Loans delivered under this option would be covered under a forward insurance agreement, secured by Fannie Mae from
an approved insurance provider that may be:
• A qualified insurer, approved to write EPMI coverage directly to Fannie Mae, which is required to transfer risk to
panel of Fannie Mae-approved reinsurers (the “reinsurance structure”), or
• A traditional mortgage insurer that is also approved by Fannie Mae pursuant to the Private Mortgage Insurer
Eligibility Requirements (PMIERs)
▪ Term of the coverage is 10 years, but policy remains in effect for all loans that are delinquent as of the 120 th month of the
policy until they fully cure
▪ As with all loans covered by primary MI and included in CAS or CIRT reference pool, Fannie Mae holds Credit Risk Transfer
investors harmless from any losses resulting from the financial inability of a mortgage insurance provider (including
providers of EPMI) to pay claims
36 © 2021 Fannie Mae.MI Factor
Streamline calculation of MI claims, accelerate payment, and reduce uncertainty
▪ Investors in CAS and CIRT transactions can now expect timelier, more predictable settlement of MI claims with no
expected material impact on aggregate proceeds received
▪ MI Factor is used to determine only the foreclosure/property preservation cost component of an MI claim, which
typically represents approximately 5% of the claim but requires the most work for all parties involved
• Current practice of using actual foreclosure/property preservation costs to determine a claim amount is replaced by a
calculation that applies a numerical factor to the property value or default UPB (shown below) (1)
▪ Factor applied to a given loan determined by using a grid that allows consideration of relevant loan characteristics that
impact foreclosure/property preservation costs
▪ Factor was developed by back-testing against 13 years of claim data covering a number of economic environments. We
found costs can be predicted with great accuracy using four loan attributes: disposition types, geography clusters,
statistically-derived home value buckets, and property type buckets
▪ To capture changing market dynamics, Fannie Mae will evaluate the selection of loan attributes and determination of
factors annually
MI Factor Calculation of Foreclosure/Property Preservation Costs
Fixed Foreclosure Costs Variable Foreclosure Costs
Property Value Property Value Min(Days between LPI Variable
x + x
Fixed Cost
or Defaulted
UPB
Factor or Defaulted
UPB
Date and Foreclosure
Date, Allowable Days)
x Cost
Factor
1Property value is used for Short Sales whereas default UPB is used for REO and Third Party Sales claims.
37 © 2021 Fannie Mae.Summary of Key Recent CIRT Deal
Terms Annual
Deal Total Initial Principal Balance Aggregate Retention Limit of Liability Retention % Limit % Effective Date Term LTV
Premium (bps)
2017 FE-1* $15,702,859,270 $78,514,296 $392,571,482 0.50% 2.50% 16.80 1/1/2017 10.5 years >60-80
2017-1 $18,090,698,569 $90,453,493 $452,267,464 0.50% 2.50% 12.96 2/1/2017 10 years >60-80
2017-2 $2,300,055,343 $11,500,277 $57,501,384 0.50% 2.50% 12.96 2/1/2017 10 years >60-80
2017 FE-2* $5,199,992,209 $25,999,961 $137,799,794 0.50% 2.65% 20.40 4/1/2017 10.5 years >80-97
2017-3 $17,679,827,869 $88,399,139 $486,195,266 0.50% 2.75% 14.04 5/1/2017 10 years >80-97
2017-4 $2,185,148,173 $10,925,741 $60,091,575 0.50% 2.75% 14.04 5/1/2017 10 years >80-97
2017-5 $20,765,119,500 $103,825,597 $467,215,189 0.50% 2.25% 11.04 8/1/2017 10 years >60-80
2017-6 $2,222,080,567 $11,110,403 $49,996,813 0.50% 2.25% 11.04 8/1/2017 10 years >60-80
2017-7 $16,281,116,305 $40,702,791 $203,513,954 0.25% 1.25% 8.88 10/1/2017 7.5 years >75-97
2018-1 $16,876,125,080 $84,380,625 $464,093,440 0.50% 2.75% 10.56 2/1/2018 10 years >60-80
2018 FE -1* $11,646,054,341 $58,230,272 $378,496,766 0.50% 3.25% 15.24 3/1/2018 10.5 years >60-80
2018 FE -2* $7,982,335,996 $39,911,680 $259,425,920 0.50% 3.25% 17.04 3/1/2018 10.5 years >80-97
2018-2 $9,031,228,264 $45,156,141 $270,936,848 0.50% 3.00% 12.96 4/1/2018 10 years >80-97
2018-3 $1,332,876,412 $6,664,382 $39,986,292 0.50% 3.00% 12.96 4/1/2018 10 years >80-97
2018-4 $19,347,933,811 $116,087,603 $580,438,014 0.60% 3.00% 12.96 6/1/2018 10 years >60-80
2018-5 $2,749,666,664 $16,498,000 $82,490,000 0.60% 3.00% 12.96 6/1/2018 10 years >60-80
2018-6 $7,905,448,916 $47,432,693 $237,163,467 0.60% 3.00% 13.80 8/1/2018 10 years >80-97
2018-7 $1,129,349,487 $6,776,097 $33,880,485 0.60% 3.00% 13.80 8/1/2018 10 years >80-97
2018-8 $12,784,981,984 $44,747,437 $191,774,730 0.35% 1.50% 8.52 9/1/2018 7.5 years >75-97
2019-1 $11,764,400,689 $70,586,404 $382,343,022 0.60% 3.25% 14.52 2/1/2019 10 years >60-80
2019-2 $17,903,736,311 $107,422,418 $581,871,430 0.60% 3.25% 14.88 2/1/2019 10 years >80-97
2019 FE -1* $7,999,597,192 $39,997,986 $259,986,909 0.50% 3.25% 12.00 5/1/2019 10.5 years >60-80
2019 FE -2* $5,998,785,285 $29,993,926 $194,960,522 0.50% 3.25% 13.68 5/1/2019 10.5 years >80-97
2019 LR FE -1* $1,060,497,386 $26,512,435 $93,323,770 2.50% 8.80% 48.48 6/1/2019 10.5 years >80-97
2019-3 $14,758,880,982 $59,035,524 $479,663,632 0.40% 3.25% 16.68 8/1/2019 12.5 years >60-80
2019-4 $10,457,116,289 $41,828,465 $392,141,861 0.40% 3.75% 17.76 9/1/2019 12.5 years >80-97
2019-5 $18,541,320,511 $27,811,981 $241,037,167 0.15% 1.30% 8.88 10/1/2019 9 years >70-97
2020-1 $18,454,052,550 $64,589,184 $553,621,577 0.35% 3.00% 13.56 1/1/2020 12.5 years >60-80
2020-2 $12,205,127,867 $48,820,511 $427,179,475 0.40% 3.50% 15.72 1/1/2020 12.5 years >80-97
FE 2020-1** $23,157,375,074 $81,050,813 $729,457,315 0.35% 3.15% 14.16 2/1/2020 13 years >60-80
FE 2020-2** $16,440,397,951 $65,761,592 $600,074,525 0.40% 3.65% 16.80 2/1/2020 13 years >80-97
Above is a summary of CIRT deal terms that, in some cases, may approximate the definitive terms of CIRT transactions posted on the Fannie Mae website:
https://capitalmarkets.fanniemae.com/resources/file/credit-risk/pdf/cirt-deal-pricing-information.pdf
Definitive deal terms are included in the published deal documents for each CIRT transaction.
*Total Initial Principal Balance, Aggregate Retention, Limit of Liability and Annual Premium reflect completion of fill up period.
** Total Amount of UPB for the deal is not to exceed stated UPB, this disclosure will be updated to show the exact UPB amount after the fill-up period has finished.
38 © 2021 Fannie Mae.Insurance Policy Key Terms – Sample
(CIRT 2020-1)
Insurance Structure: Aggregate excess of loss credit insurance
Portfolio of 21 to 30-year fixed-rate residential mortgage loans acquired
Covered Loans:
between July 1, 2019 and October 31, 2019
Initial Principal Balance: $18.5 Billion
Limit of Liability: 3.00% of the total Initial Principal Balance ($553.6M)
Retention / First Loss Risk: 0.35% of the total Initial Principal Balance ($64.6M)
Monthly Premium Rate: 0.0113% of remaining UPB
At 12 month following effective date, and each month thereafter, limit of liability
shall be reduced to the lesser of:
a) the Remaining Limit of Liability at such date, or
b) the greater of:
i. At initial step down, total current UPB x 115% of limit of liability %;
Step-Down of Limit Liability:
thereafter, total current UPB x limit of liability%, or
ii. 650% of (SDQ+REO) UPB at year 1 or
iii. 425% of (SDQ+REO) UPB at year 2, or
iv. 300% of (SDQ+REO) UPB at years 3 and 4, or
v. 200% of (SDQ+REO) UPB at year 5 – Term
12.5-year term. Fannie Mae may terminate coverage on/after the 5-year
Cancellation: anniversary, and early termination fee paid if early termination option exercised
between 5-year and 10-year anniversary.
39 © 2021 Fannie Mae.Example of Loan Level Overview of
Covered Loss
Property
Default
(2 missed payments) Mediation Foreclosure Date Disposition Date
Loss Applied to
Foreclosure Proceedings REO Process CIRT Structure
$100k Home (Typically initiated on 3rd missed
(95% LTV) payment)
Equity $33k Primary $2k Net Loss
MI Recovery
$95k ▪ Delinquent Accrued (30% of (UPB +
Interest(2) DQ Int +
Unpaid Expenses))
Principal ▪ Maintenance &
Balance Preservation(2),(3) $108k Sale
(UPB)(1) ▪ Legal Costs(2),(3) Proceeds +
▪ Real Estate MI
$75k Sale
Taxes/Fees(2),(3) Recovery
Proceeds
$15k Interest and
expenses
(1) Loss covered by Mortgage Insurance
(2) The covered loss may be curtailed based upon eligibility under MI policy
(3) The covered loss may be estimated under MI factor
40 © 2021 Fannie Mae.How MI Works: Typical Loan
MI Benefit
Settled with the
“Percentage Option”
▪ MI Coverage acquired by Servicer files claim = (Default UPB + DQ
Lender Servicer Informs MI Interest + Allowable
within 60 days of
▪ Fannie Mae’s requirement of 60-day DQ Expenses) x MI Coverage %
Foreclosure
for MI Coverage Percent
determined by Original LTV
Last Paid Foreclosure Claim Property
Loan Origination
Installment Date Paid Disposition Date
Foreclosure Expenses Disposition Expenses
Accrued Accrued
Potential MI Cancellation due to:
• Loan amortizes to 78% of • DQ Interest* • Property Preservation Residual loss (net of MI
original home value (automatic) • Foreclosure Costs ** • Associated Taxes Benefit) applied to CIRT
• Property balance reduced to • Asset Recovery Costs ** • Misc. structure 90 days after
80% of original value (borrower- • Associated Taxes ** property disposition
initiated) • Misc.**
• Current property valuation
(borrower-initiated)
Loan must be current and meet
other requirements
The claim must be “perfected” (received all
required documentation) within 120 days of
* The covered loss may be curtailed based upon eligibility under MI policy
** The covered loss may be estimated under MI factor
claim filing, and settled within 180 days of
the “perfect date”.
41 © 2021 Fannie Mae.How MI Works
Disaster event
Under MI Master policies, an MI claim can be denied if there is material physical damage to the property caused by
disaster (flood, earthquake, and any event declared so by the Federal Emergency Management Agency (FEMA))
The determination as to whether a disaster event was the principal cause of default is made by:
▪ Direct evidence
▪ If certain additional criteria are met in totality, some of which may include, but not limited to:
• The property has not been restored to its condition on the commitment date, reasonable (wear and tear
excepted),
• The property is uninhabitable,
• The default occurred on or after the date that the physical damage occurred.
Other physical damage
Claim can be denied in full or result in a reduced benefit if:
▪ As of the claim submission date, the property has not been restored to its condition that existed on the commitment
date, reasonable wear and tear excepted.
▪ The mortgage insurance company reasonably determined that the estimated cost to restore the property to it
condition on the commitment date exceeds $5,000
42 © 2021 Fannie Mae.Comparing MI Options
Key Feature BPMI LPMI EPMI
Buyer of MI Lender Lender Fannie Mae
MI Premium Paid By Borrower Lender Fannie Mae
Can borrower lower
mortgage payment
Yes No No
through MI
cancellation?
▪ Must be automatically
canceled, e.g., when LTV ratio
MI cancellation scheduled to reach 78% None – coverage exists for life of None, although coverage is for a 10-year
provision ▪ May be canceled by borrower loan term
based upon paydown of loan
or property appreciation
10 years, but the policy remains in effect
Terminates upon cancellation
Length / term of for all loans that are delinquent as of the
(see MI cancellation provisions Life of Loan
coverage 120th month of the policy until they fully
above)
cure
Approved MI companies, Approved MI Companies, Negotiated policy, insurer selected by
Policy
selected by borrower/lender selected by borrower/lender Fannie Mae
Origination Guidelines Fannie Mae and MI guidelines Fannie Mae and MI guidelines Fannie Mae guidelines
Loan Quality Reviews Fannie Mae and MI guidelines Fannie Mae and MI guidelines Fannie Mae guidelines
Claim Filing Servicer files claims Servicer files claims Fannie Mae files claims
43 © 2021 Fannie Mae.HomeReady®
Fannie Mae’s flagship affordable lending product
▪ Designed to serve creditworthy borrowers and to help fulfill our affordable housing mission and regulatory housing goals
while maintaining strong, sustainable credit standards
HomeReady helps to improve housing affordability by reducing borrower costs:
▪ Reduced MI requirements for LTV>90 result in lower monthly payment
▪ Lower loan-level price adjustments (LLPAs) help to reduce the rate and/or fees charged to the borrower
Borrower Eligibility Changes – July 2019
Fannie Mae announced changes to the income limits for eligible HomeReady borrowers, beginning with new casefiles submitted
to Desktop Underwriter on or after July 20, 2019:
New applications
Prior to July 20, 2019
on or after July 20, 2019
Borrowers’ total annual qualifying Borrowers’ total annual qualifying income
income may not exceed may not exceed
Borrower income limit requirements 100% 80%
of the area median income (AMI) for the of the area median income (AMI) for the
property’s location property’s location
No limitation on borrower income if Borrowers’ total annual qualifying income
Properties in low-income census tracts subject property is located in a low- may not exceed 80% of the area median
income census tract income (AMI) for the property’s location
Share of CAS 2020-R02 HomeReady UPB
94.8% 5.2%
44 © 2021 Fannie Mae.High Loan-to-Value Refinance Offering
The high LTV refinance offering provides limited cash-out refinance opportunities to borrowers with
existing Fannie Mae mortgages who are making their mortgage payments on time, but whose LTV ratio
for a new mortgage exceeds 97% for a one-unit principal residence(1). Without the high LTV refinance
offering, borrowers generally may not otherwise have the ability to refinance.
For the loan to be eligible for the offering, at
The offering applies to mortgage
Steploans
One Step Two least 15 months must have passedStep fromFour
the
acquired by Fannie Mae that were originated
note date of the loan being refinanced to the
on or after October 1, 2017.
DU File Submission
note date of the new loan.
The refinance must provide one or more of these borrower benefits
Reduced monthly payment Shorter amortization term
More stable mortgage product, such as moving from
Lower interest rate an adjustable-rate mortgage to a fixed-rate mortgage
(1) or exceeds the maximum allowable LTV ratio for a limited cash-out refinance for other segments as listed in Fannie Mae’s Eligibility Matrix.
45 © 2021 Fannie Mae.Innovation with Collateral Underwriter
Fannie Mae’s appraisal waiver leverages DU and CU in an integrated fashion to offer appraisal waivers for
certain lower-risk eligible loans.
DU CU
DU
eligibility eligibility Waiver offered
file submission
exclusion checks exclusion checks
▪ The subject property generally has a prior appraisal that was analyzed by CU.
▪ CU will evaluate the prior appraisal for overvaluation or property eligibility issues. If any of these issues
exist, an appraisal waiver will not be granted.
▪ CU will use the prior appraised value along with Fannie Mae’s Home Price Index to assess the
reasonableness of the estimated property value provided by the lender in DU.
▪ If estimated property value is reasonably supported, the loan may be eligible for a waiver, subject to
additional eligibility requirements.
▪ The majority of transactions will continue to require an appraisal
▪ Advanced data collection techniques along with CU drive future collateral innovation
Part of Fannie Mae’s commitment to simplifying the complexity of mortgage origination by
creating efficiencies and delivering innovations, leveraging data.
46 © 2021 Fannie Mae.Contact Us
Information is available for reinsurers and potential reinsurers
about Fannie Mae's products, the company's financial
performance, and disciplined management of credit risk and
interest rate risk.
For more information, please contact us:
Credit_Securities@fanniemae.com
800-2FANNIE (800-232-6643)
@fanniemae
www.facebook.com/fanniemae
By Mail:
Fannie Mae
c/o Treasurer’s Office, Fixed-Income Securities Marketing,
1100 15th Street NW
Washington, DC 20005
Fannie Mae is headquartered in Washington DC
and operates regional offices in Chicago, Plano, Los Angeles, and
Philadelphia.
Headquarters
1100 15th Street NW
Washington, DC 20005
47 © 2021 Fannie Mae.You can also read
