single-family credit insurance risk transfer - …...credit insurance risk transfer tm (cirt tm)...

Single-Family Credit Insurance Risk TransferTMThe Insurance Opportunity in U.S. Mortgage Credit

June 2020

© 2020 Fannie Mae.

DisclaimersCopyright© 2020 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 March 31, 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 © 2020 Fannie Mae.

Contents

Page 04Program Overview

Page 13Reinsurance Opportunity

Page 19Historical Comparative Analysis

Page 29Investor Resources

5Appendix

© 2020 Fannie Mae. 3

Program Overview

© 2020 Fannie Mae.

Fannie Mae sits at the very heart of the U.S. housing industry.

We purchase qualifying mortgages from lenders, bundle them into bonds and sell to investors. Lenders use their replenished cash to originate new mortgages, and we use ours to start the process again. This continuous flow of money promotes a healthy housing market.

We are America’s Housing Partner.

We partner with lenders to create home purchase (single-family) and rental (multifamily) opportunities for millions of Americans across the country.

1 in 4 single-family homes are financed by us.

Who We Are

*Single Family, Approximate

© 2020 Fannie Mae.5

Providing liquidity to the housing market and investment options to rates and credit investors.

LenderOriginates loans

Interest Rate InvestorPurchases MBS &

assumes interest rate risk

Credit InvestorPurchases credit risk securities & assumes portion of credit risk

Credit Risk Securities

Fannie Mae Creates guaranteed MBS &

non-guaranteed credit risk securities

Proceeds from sale of MBS flow back to lender to fund new loans

MBS

Delivers loansServices loans

Pays guaranty fee

Securitizes loans. Guarantees principal &

interest on MBS in exchange for guaranty fee

Our Single-Family Business


Our Size and Scale: Single-Family


Private-Label Securities

4%r44

Fannie Mae38%

Freddie Mac26%

Ginnie Mae32%

As of December 2019, U.S. Single Family 1st Lien mortgage debt outstanding totaled $10.7 trillion. Fannie Mae’s share stood at approximately $3.0 trillion,

nearly 28% of the market.

Fannie Mae was the largest issuer of single-family mortgage securities in the first quarter of 2020.

The U.S. mortgage market is dominated by the 30-year Fixed-Rate Mortgage (FRM).

We provided $205 billion in mortgage liquidity across the country in the first quarter of 2020.

*Source: Federal Reserve’s Flow of Funds

Q1 2020 Market Share: New Single-Family Mortgage-Related Securities Issuances

$-

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$12,000

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2013 2014 2015 2016 2017 2018 2019 2020

Billi

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Fannie Mae Issuance by Product Type

30-Yr FRM 15-year FRM 20-year FRM 10-year FRM Other Fixed ARM

Credit Risk Transfer Overview


Program benefits: Benchmark issuer Large, geographically diversified loan pools Innovative credit-risk management tools Program transparency Unique online investor tools and resources

Fannie Mae’s suite of risk sharing programsConnecticut Avenue SecuritiesTM (CAS)

The benchmark for U.S. mortgage credit$47 billion issued since program inception*

Covering over $1.5 Trillion in UPB at

issuance*

Credit Insurance Risk TransferTM (CIRTTM)

Attracts diversified insurers/ reinsurers$12.9 billion committed since program inception*

Covering over $474 billion in UPB at

issuance*

We have transferred over $62 billion in single-family credit risk to private market participants since 2013, transferring a portion of the credit risk on

$2.2 Trillion of UPB at Issuance*

* Issuance amount (not outstanding UPB) through March 31, 2020

Lender risk sharing vehicles

Customized lender risk sharing transactions$6.7 billion issued since program inception*

Covering over $203 billion in UPB

at issuance*

9

Transparent pricing provided on our webpage for all transactions – along with key deal documents and transaction data

Large, geographically diversified loan pools provide broad exposure to U.S. housing market

Fannie Mae acts as an intermediary between the lender and investor to set standards, manage quality, mitigate losses, and maximize value

Ongoing, programmatic issuance and flexible design – can cover various loan types acquired by Fannie Mae

Powerful investor resources – including proprietary analytical tool Data Dynamics®

Fannie Mae has committed to transfer $12.9B of risk on over $474B of loans under the CIRT program through March 31, 2020.

CIRT Program Benefits and Volumes

© 2020 Fannie Mae.

0

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2014 2015 2016 2017 2018 2019 2020

$ in

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CIRT Risk Transferred

Limit of Liability


Improve quality and drive efficiency by using data and eliminating manual processes throughout the entire lifecycle.

Production Execution

Insights Servicing

EarlyCheckTM

Single Source Validation Desktop Underwriter® &

Desktop Originator® Application Program Interfaces Collateral Underwriter®

Fannie Mae ConnectTM

Loan Quality ConnectTM

Pricing & Execution – Whole Loan®/MBS®

Servicing Execution ToolTM

Servicing Marketplace Loan Delivery

Servicing Management Default UnderwriterTM

Default Management Reporting System

Mortgage Technology Platform

PAST FUTURE Lots of paper Complex and manual Time consuming and costly

Reduced paper by connecting to source data Easier and more efficient Streamlined and automated

Our Goal: Reducing Credit Losses Through a Fully Digital and Secured Mortgage Process

11

Lender quality Loan quality Servicing quality Property management

■ Lenders undergo a rigorous approval process prior to doing business with Fannie Mae and must meet ongoing net worth and business operational requirements.

■ Lenders are subject to ongoing oversight through comprehensive operational reviews to assess the effectiveness of their quality control procedures.

■ Loans must be underwritten in accordance with Fannie Mae guidelines.

■ 90%(1) of loans that we acquire are evaluated through Desktop Underwriter® (DU®), the industry’s most widely used automated underwriting system.

■ 100% of Fannie Mae’s single family and condominium appraisals are assessed through Collateral Underwriter® (CU®), our proprietary appraisal risk assessment tool.

■ Fannie Mae sets loan servicing standards, acts as Master Servicer, and provides oversight of loan servicers.

■ We set standards for loss mitigation and borrower workout options. Our proprietary servicing tool, Servicing Management Default UnderwriterTM (SMDUTM), automates our servicing policies.

■ We manage all property management and disposition in house, managing one of the industry’s largest real-estate owned portfolios –disposing of over 1.8 million homes since 2009.

■ Our strategy is to sell non-distressed homes to owner-occupants, helping to maximize sales proceeds, stabilize neighborhoods, and preserve the value of our guaranty book.

(1) Approximate

Our Credit Risk Management Approach

© 2020 Fannie Mae.

Fannie Mae’s industry-leading technology drives improved loan quality and better outcomes.

Credit Risk Management Highlights


1-2 hours saved per loan with automated loss mitigation

22,700+ Registered Users*

100% of single-family and condominium appraisals go through CU as part of our QC process

41 Million +Appraisals collected to date

Best execution approach to sell real estate based on Net Present Value comparison to move-in ready home sold to owner occupant

100% of REO sales managed in-house: resulting in higher owner occupant rates, higher sales prices, and reduced severities

In 2019, $430 BN in UPB delivered to Fannie Mae had one or more Day 1 Certainty components

6.7 Million +Appraisals viewed by lenders since launch

3,200+ Registered Lenders/ Agents

1,900(1)

Lenders/Agents Loan deliveries in 2019 through DU®(1)

~90% of Delinquencies covered throughSMDU®

Desktop Underwriter® Collateral Underwriter®

Real Estate Owned

1.8 million+Homes disposed of since 2009

69+ MillionUsers to date

Over 850 servicers currently benefit from SMDU through B2B integration or through the SMDU User Interface

Provides consistent decisioning for loss mitigation solutions

Servicing Management Default UnderwriterTM

+90%

(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

Reinsurance Opportunity

© 2020 Fannie Mae.

Proportional allocation for

CAS

CIRT Reference Pool Selection Process Example: 30 year, >60-80 LTV


Selection of Acquisitions

Current UPB covered in

Credit Insurance

Risk Transfer Transaction

Based upon recent

acquisition period

(random division)

(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.

Fully amortizing, generally 25-year and 30-year fixed-rate(1), 1-4 unit, first lien, conventional

Not Refi Plus™ / Not HARP(2)

Random Division

60% < Loan-to-Value < 80%

0 x 30 payment history since acquisition

Other exclusions may apply

Reinsurance Deal Structure


Lender X

Lender 1

Lender 2

Lender 3

Lender 4

… Trust Agreement

Premium Paid

Fannie Mae has Co-Beneficial Interest in Trust

Protected Cell

Reinsurer B

“Cut Through” Endorsement to Quota Share (“QS”) Reinsurance Agreement

Loss Recoveries

Aggregate XOL

Insurance Policy

Premium Ceded

Loss Recoveries

Quota Share Reinsurance

Treaty

Loans delivered to FNMA under

(Mortgage Selling and Servicing

Contract)

Fannie Mae

Loans owned or

guaranteedReinsurer C

Interest & Liability Agreement

…

Reinsurer X

Reinsurer A

Insurance Policy Structural OverviewIllustration


Key Features: Simple loss structure

Structured with retention layer and an aggregate limit of liability

Fannie Mae retains first loss (retention) layer

If retention layer is exhausted, reinsurers cover actual losses up to aggregate limit of liability

Actual loss is determined after property disposition

Limit may step down on first anniversary and monthly thereafter depending on level of delinquencies and pool paydowns

Partial collateralization of risk exposure, based upon external ratings of reinsurer

Termination option at any time on/after Year 5 with a fee paid to reinsurers

“Clean up” call once covered balance <10% initial covered balance without a termination fee

0.40% first loss layer(retained by Fannie Mae)

3.25% aggregate limit of liability(risk transferred to reinsurers)

Catastrophic losses (retained by Fannie Mae)

3.65%

0.40%

Limit of Liability Step Down


Step down typically begins at Month 12 following the effective date and monthly thereafter

Remaining limit of liability will be reduced based on the paydown of the covered pool and balance of delinquent loans

Limit step down beneficial to reinsurers as collateral requirement declines

Fannie Mae has early termination option at Month 60

Expected Scenario - Illustration

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Comparison of Typical CIRT Bulk Deals and Front End Deals


Bulk Deal Front-End Deal

Loan Acquisitions Period 2-9 months prior to inclusion in pool Future acquisition months (can also include 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 of Liability Determination At the time of policy executionLimit % determined at the time of policy execution; limit $ determined at the end of the fill-up period

Limit of Liability Step Down May begin 12 months following effective date and monthly thereafter

May begin 18 months following effective date and monthly thereafter

Monthly Premium Based on competitive bids; locked in at time of execution

Based on competitive bids for a sample pool of loans, with pricing true-up at end of fill-up period

Loan Profile Restrictions Follows standard eligibility; covered loans are disclosed prior to pricing

Follows standard eligibility; pricing based upon an indicative reference pool; may include restrictions on final risk attributes of the pool

Reinsurer Collateral Collateral amount due at time of execution

Collateral posted as covered loan pool is delivered

Historical Comparative Analysis

© 2020 Fannie Mae.

Acquisition Profile


Only loans with LTV between 60-97 are included. Excludes loans with CLTV >97Statistics weighted by origination UPB

1Risk Layers defined as: Investor Property, DTI 46-50 (rounded to the nearest integer), FICO<680, & Cash-out Refinance2Rounded to the nearest integer

Source: Fannie Mae Data, as of March 2020 activity date

> 60-97 LTV Historical FRM30 Loan Acquisition Profile

Orig Year Original UPBWA Note

Rate WA FICO WA DTI WA OLTV WA OCLTV%

Purchase % CAWA Risk Layers1 % Investor

% FICO < 680

% Cash-out % DTI 46-502

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 $1146.7B 4.18% 746 34.8 81.7 82.2 65% 20% 0.36 6.4% 9.2% 15.1% 5.6%

2018 $270.5B 4.84% 743 38.0 82.8 83.1 75% 16% 0.57 6.4% 10.5% 16.3% 24.3%

Q1 2019 $30.6B 4.87% 742 38.0 83.6 83.9 72% 17% 0.53 5.8% 9.3% 15.3% 22.3%

CAS/CIRT Eligible Loan Acquisition Profile

Orig QuarterOriginal

UPBWA Note

Rate WA FICO WA DTI WA OLTV WA OCLTV % Purchase % CAWA Risk Layers1 % Investor

% FICO < 680 % Cash-out

% DTI 46-502

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%

Acquisition Profile


(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 March 2020 activity date

60.01-80.00 LTV CAS/CIRT Eligible Loan Acquisition ProfileOrig Date Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20

Original UPB ($M) $ 10,417 $ 13,511 $ 16,727 $ 17,682 $ 22,042 $ 25,117 $ 25,911 $ 25,345 $ 23,650 $ 25,185 $ 22,614 $ 21,331 $ 30,174 WA Note Rate 4.9% 4.7% 4.6% 4.5% 4.4% 4.2% 4.1% 3.9% 3.9% 4.0% 4.0% 4.0% 3.8%

WA FICO 743 744 747 750 751 752 753 755 754 752 752 751 754WA DTI 37.3% 37.0% 36.5% 36.1% 35.9% 35.7% 35.4% 34.9% 35.2% 35.6% 35.8% 35.8% 35.1%

WA OLTV 75.5% 75.6% 75.5% 75.5% 75.5% 75.3% 75.1% 74.8% 74.7% 74.7% 74.6% 74.6% 74.5%WA CLTV 76.0% 76.0% 75.9% 76.0% 75.9% 75.7% 75.4% 75.2% 75.1% 75.2% 75.1% 75.0% 74.9%

% Purchase 55.4% 56.0% 53.8% 57.1% 53.9% 47.6% 42.1% 34.3% 34.6% 36.0% 35.9% 32.8% 31.0%% CA 20.8% 21.5% 21.5% 20.6% 21.1% 22.0% 22.7% 22.7% 22.2% 22.8% 23.6% 23.8% 23.7%

WA Risk Layers1 0.70 0.68 0.68 0.57 0.55 0.53 0.52 0.50 0.53 0.56 0.58 0.60 0.55% Investor 9.9% 9.5% 8.9% 7.7% 7.2% 6.5% 6.3% 5.8% 6.6% 6.3% 6.8% 6.8% 7.3%

% FICO < 680 10.7% 10.2% 8.8% 8.0% 7.5% 6.6% 6.2% 5.1% 5.4% 5.5% 6.0% 6.1% 5.2%% Cashout 28.2% 27.8% 25.5% 23.0% 23.6% 22.9% 23.9% 24.9% 26.4% 28.3% 28.6% 30.8% 28.5%

%DTI 46-50 21.7% 20.3% 18.9% 18.0% 17.1% 16.6% 15.8% 14.3% 15.0% 15.8% 16.3% 16.0% 14.4%

80.01-97.00 LTV CAS/CIRT Eligible Loan Acquisition ProfileOrig Date Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20

Original UPB ($M) $ 8,924 $ 12,252 $ 14,848 $ 16,130 $ 19,273 $ 20,072 $ 18,661 $ 16,798 $ 14,787 $ 15,852 $ 14,408 $ 13,551 $ 19,064 WA Note Rate 4.8% 4.7% 4.5% 4.4% 4.3% 4.1% 4.0% 3.9% 3.9% 3.9% 3.9% 3.9% 3.8%

WA FICO 741 743 744 745 744 745 746 749 749 747 748 748 749WA DTI 38.5% 38.1% 37.8% 37.6% 37.5% 37.3% 37.1% 36.7% 36.7% 37.1% 37.1% 37.0% 36.4%

WA OLTV 92.8% 92.8% 92.7% 92.7% 92.6% 92.3% 92.2% 91.6% 91.5% 91.6% 91.5% 91.5% 91.5%WA CLTV 92.8% 92.8% 92.7% 92.7% 92.6% 92.3% 92.2% 91.6% 91.5% 91.6% 91.5% 91.5% 91.5%

% Purchase 90.6% 90.5% 88.0% 89.2% 86.3% 81.1% 77.9% 69.2% 68.8% 71.1% 71.4% 69.4% 66.7%% CA 12.5% 13.4% 13.3% 12.2% 12.4% 12.6% 12.5% 13.8% 12.9% 14.4% 15.4% 15.6% 14.2%

WA Risk Layers1 0.30 0.28 0.27 0.26 0.26 0.24 0.23 0.21 0.21 0.21 0.22 0.21 0.19% Investor 0.3% 0.4% 0.3% 0.2% 0.2% 0.2% 0.2% 0.3% 0.3% 0.3% 0.3% 0.2% 0.2%

% FICO < 680 7.5% 7.0% 6.5% 6.7% 6.5% 6.1% 5.9% 4.8% 4.5% 4.4% 4.8% 4.3% 3.8%% 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%

%DTI 46-50 22.2% 20.3% 19.9% 19.1% 18.8% 18.1% 17.2% 16.0% 16.2% 16.3% 16.9% 16.6% 14.5%

Total Mortgage Origination Volume and FICO


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

2000 – Mar 2020 2015- Mar 2020Source: Fannie Mae. Origination estimates for aggregate market

Credit profile typically fluctuates with the origination cycle

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DU Model Updates

(1) Rounded to the nearest integer

DU TimelineJuly 2017: DU 10.1 Enabled loans with DTI ratios above 45% (up to 50%) to rely on DU’s

comprehensive risk assessment

Removed DU model overlays with set maximum LTV ratio and minimum reserves requirements for those loans

Dynamic Credit ManagementMarch 2018: DU 10.2 Revised DU’s risk assessment to limit risk layering

Fewer DU Approve recommendations on loans that have multiple higher-risk characteristics

December 2018: DU 10.3 Enhanced DU’s management of multiple risk layers

Six months of reserves for cash-out refinances with DTI over 45% to address increase in high DTI acquisitions

July 2019 Certain new loan casefiles submitted to DU will receive an Ineligible

recommendation when multiple high-risk factors are present

We have updated the DU eligibility assessment to better align the mix of business delivered to Fannie Mae with the composition of business in the overall market

April 2020 Revised DU’s risk and eligibility assessments to result in modest

reduction of loan casefiles with high-risk factors receiving an Approve/Eligible recommendation

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https://singlefamily.fanniemae.com/media/7826/display

https://singlefamily.fanniemae.com/media/22371/display


The key attribute of the HomeReady® program is the lower-than-standard MI levels required for loans with LTV greater than 90%

Although chart above shows MI levels that are considered “standard”, we have historically acquired loans with varying levels of MI coverage

Fannie Mae’s historical data release provides insights into the historical severities of loans with different levels of MI coverage

Reinsurers and investors must estimate loss exposure based upon loan-level attributes of the covered loans, including loan-level MI coverage

Effective July 20, 2019, Borrower’s income must be less than or equal to 80% of area median income (AMI). Prior to that, Borrower’s income had to be less than or equal to 100% of AMI or the property had to be located in a low income census tract (31% of census tracts as of 2017)

LTV Range (%) Standard MI Coverage (%)

Home Ready MI Coverage (%)

95.01 – 97.00% 35.0% 25.0%

90.01 – 95.00% 30.0% 25.0%

85.01 – 90.00% 25.0% 25.0%

80.01 – 85.00% 12.0% 12.0%

HomeReady Impact on MI Coverage

Note: most loans have “standard” coverage; however, levels may differ on some loans – this is disclosed on the loan-level deal file

Source: Fannie Mae Single Family March 2020 Data Release

Light blue cells indicate standard MI% for respective OLTV bucket, while orange cells indicate HomeReady MI%

Historical Loan Count by Mortgage Insurance (MI) %Origination Vintage

OLTV Mi Pct 1999-2004 2005-2008 2009-2013 All

91-95

18 3,724 1,096 199 5,01925 371,520 117,830 44,456 533,80630 551,240 146,715 447,447 1,145,40235 11,850 9,678 2,020 23,548

96-97

18 64,318 4,137 2,027 70,48225 1,008 565 629 2,20230 39,538 861 27,401 67,80035 79,228 25,355 43,791 148,374

All 1,122,426 306,237 567,970 1,996,633

Historical Severity by Mortgage Insurance (MI) %Origination Vintage

OLTV Mi Pct 1999-2004 2005-2008 2009-2013 All

91-95

18 27.4% 30.5% 11.7% 28.9%25 22.1% 27.0% 14.7% 25.0%30 20.3% 26.8% 8.4% 23.5%35 23.9% 19.7% 5.5% 20.3%

96-97

18 25.6% 43.7% 10.6% 32.3%25 20.6% 18.4% 4.9% 18.8%30 20.3% 34.3% 4.6% 20.5%35 22.2% 22.7% 3.3% 21.8%

All 21.3% 26.6% 9.4% 23.9%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Loss

as a

% o

f Orig

inat

ion

UPB

Comped Loss of CIRT 2020-1 (>60-80 LTV) Across Vintage YearsNet Loss Rate Pipeline Loss Rate Terminal DLQ Loss Rate Mod Cost Rate

Historical Loss Performance


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.co m/DataDyna mics

Limit of Liability Detach: 3.35%

Retention Detach: 0.35%

http://www.fanniemae.com/DataDynamics

Historical Loss Performance


Note: Total Loss Rate is the aggregate loss rate or the loss rate estimated over the term of the CIRT dealSource: Fannie Mae Data Dynamics. www.fanniemae.co m/DataDyna mics

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

CIR

T 20

15-1

CIR

T 20

15-2

CIR

T 20

15-3

CIR

T 20

16-1

CIR

T 20

16-2

CIR

T 20

16-3

CIR

T 20

16-7

CIR

T 20

16-8

CIR

T 20

17-1

CIR

T 20

17-2

CIR

T 20

17-5

CIR

T 20

17-6

CIR

T 20

18-1

CIR

T 20

18-4

CIR

T 20

18-5

CIR

T 20

19-1

CIR

T 20

19-3

CIR

T 20

20-1

Loss

Rat

e as %

of O

rigin

atio

n UP

B

>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 distributionRetained First Loss Limit of Liability Total Loss Rate

http://www.fanniemae.com/DataDynamics

Loan Performance Compared to 2001 Vintage


“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.

CIRT deals through March 31, 2020 are outperforming the strong 2001 vintage

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 64

Ever

D90

/Orig

inal

UPB

Seasoning (Months since Origination)

CIRT Low LTV (61-80 LTV) Ever D90 Performance

2001 CIRT 2015-1 CIRT 2015-2 CIRT 2015-3

CIRT 2016-1 CIRT 2016-2 CIRT 2016-3 CIRT 2016-7

CIRT 2016-8 CIRT 2017-1 CIRT 2017-1 FE CIRT 2017-2

CIRT 2017-5 CIRT 2017-6 CIRT 2018-1 CIRT 2018-1 FE


CIRT 2019-3 CIRT 2020-1 CIRT 2020-1 FE 2001 Comped

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 64

Ever

D90

/Orig

inal

UPB


CIRT High LTV (81-97 LTV) Ever D90 Performance

2001 CIRT 2015-4 CIRT 2015-5 CIRT 2016-1 FE




CIRT 2019-2 FE CIRT 2019-4 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

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.

Loan Performance– Harvey, Irma, Maria, Florence, and Michael Removed

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 64

Ever

D90

/Orig

inal

UPB


CIRT Low LTV (61-80 LTV) Ever D90 Performance

2001 CIRT 2015-1 CIRT 2015-2 CIRT 2015-3


CIRT 2016-8 CIRT 2017-1 CIRT 2017-1 FE CIRT 2017-2



CIRT 2019-3 CIRT 2020-1 CIRT 2020-1 FE 2001 Comped

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 64Ev

er D

90/O

rigin

al U

PBSeasoning (Months since Origination)

CIRT High LTV (81-97 LTV) Ever D90 Performance

2001 CIRT 2015-4 CIRT 2015-5 CIRT 2016-1 FE




CIRT 2019-2 FE CIRT 2019-4 CIRT 2020-2 CIRT 2020-2 FE

2001 Comped

Investor Resources

© 2020 Fannie Mae.


Webpage focused on COVID-19 Investor resources including FAQs, announcements, and Lender Letters.

Visit the site.

Investor ResourcesAn overview of Fannie Mae’s temporary selling, servicing, and collateral policies related to COVID-19.

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Commentary and NewsNew dashboards to view performance of loans in temporary payment forbearance or modification, and analyze historical outcomes for those loans. View user guide.

Data Dynamics Enhancements

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COVID-19 Investor Resources

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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

http://www.fanniemae.com/loanperformance


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):

Loan and BorrowerCharacteristics

Property Type HomeReady Program Indicator, and First Time Home Buyer Indicator

High Loan-to-Value Refinance Indicator

Number of Borrowers Original Debt to Income RatioBorrower FICO and Co-Borrower FICO scores (at origination, deal issuance, and ongoing)

Collateral Characteristics

Number of Units Original Loan to Value Ratio (LTV) and Combined LTV Ratio (CLTV) Three digit zip code

Occupancy Type Metropolitan Statistical AreaProperty Inspection Waiver Flag(1)

Servicing DataServicer Name Loan Payment History Reason and Date as to why a loan

balance went to zero

Mortgage Insurance Cancellation Indicator Modification Flag Current Loan Delinquency Status

Loan Term Characteristics

Original and Current Interest Rate Original Loan Term Loan Age

Original and Current UPB Origination Date Maturity Date

Disposition DataLast Paid Installment Date Foreclosure Date Detailed Proceed Fields

Original and Current List Priceand Date Disposition Date Detailed Expense Fields

(1) Available beginning with CIRT 2017-7 and forward

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.

Access today at www.fanniemae.com/datadynamics

Access

Transparency

Insights

Available 24x7 at no cost. Access at-issuance and ongoing monthly performance data directly through new API (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

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

Quick access to potential impacts of events (e.g., natural disasters)


NEW: • Forbearance & Modification Dashboards: enables users to access

snapshots of performance on active population of loans in temporary payment forbearance or modification

http://www.fanniemae.com/datadynamics

Powerful insights and capabilities


Aggregate performance of a specific portfolio

Compare credit profile of a new deal to outstanding deals

View delinquency performance of credit tails and how loans move between states of delinquency from period to period

Observe loan disposition characteristics and trends

Analyze potential impacts of market events (e.g. natural disasters)

Export data for additional analysis

Drill into forbearance and modification data

…and much more.

Dynamic drillable analysis enables investors to keep abreast of their investments and emerging trends

Download Functionality

View a standardized file for all remittance months for every deal since inception

Download at-issuance and on-going file data by date range, deal type, or simple search

Access the reference pool file immediately


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 120th 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


Streamline calculation of MI claims, accelerate payment, and reduce uncertaintyMI Factor 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

Property Value or Defaulted

UPB

Fixed Cost Factor

Property Value or Defaulted

UPB

Min(Days between LPI Date and Foreclosure Date, Allowable Days)

x x x+

Fixed Foreclosure Costs

Variable Cost

Factor

Variable Foreclosure Costs

1Property value is used for Short Sales whereas default UPB is used for REO and Third Party Sales claims.

Summary of Key Recent CIRT Deal Terms


*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.

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://www.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.

Deal Total Initial Principal Balance Aggregate Retention Limit of Liability Retention % Limit % Annual Premium (bps) Effective Date Term Product LTV

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 21-30 year FRM >60-802017-1 $18,090,698,569 $90,453,493 $452,267,464 0.50% 2.50% 12.96 2/1/2017 10 years 21-30 year FRM >60-802017-2 $2,300,055,343 $11,500,277 $57,501,384 0.50% 2.50% 12.96 2/1/2017 10 years 21-30 year FRM >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 21-30 year FRM >80-972017-3 $17,679,827,869 $88,399,139 $486,195,266 0.50% 2.75% 14.04 5/1/2017 10 years 21-30 year FRM >80-972017-4 $2,185,148,173 $10,925,741 $60,091,575 0.50% 2.75% 14.04 5/1/2017 10 years 21-30 year FRM >80-972017-5 $20,765,119,500 $103,825,597 $467,215,189 0.50% 2.25% 11.04 8/1/2017 10 years 21-30 year FRM >60-802017-6 $2,222,080,567 $11,110,403 $49,996,813 0.50% 2.25% 11.04 8/1/2017 10 years 21-30 year FRM >60-802017-7 $16,281,116,305 $40,702,791 $203,513,954 0.25% 1.25% 8.88 10/1/2017 7.5 years 15-20 year FRM >75-972018-1 $16,876,125,080 $84,380,625 $464,093,440 0.50% 2.75% 10.56 2/1/2018 10 years 21-30 year FRM >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 21-30 year FRM >60-802018 FE -2* $7,982,335,996 $39,911,680 $259,425,920 0.50% 3.25% 17.04 3/1/2018 10.5 years 21-30 year FRM >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 21-30 year FRM >80-972018-3 $1,332,876,412 $6,664,382 $39,986,292 0.50% 3.00% 12.96 4/1/2018 10 years 21-30 year FRM >80-972018-4 $19,347,933,811 $116,087,603 $580,438,014 0.60% 3.00% 12.96 6/1/2018 10 years 21-30 year FRM >60-802018-5 $2,749,666,664 $16,498,000 $82,490,000 0.60% 3.00% 12.96 6/1/2018 10 years 21-30 year FRM >60-802018-6 $7,905,448,916 $47,432,693 $237,163,467 0.60% 3.00% 13.80 8/1/2018 10 years 21-30 year FRM >80-972018-7 $1,129,349,487 $6,776,097 $33,880,485 0.60% 3.00% 13.80 8/1/2018 10 years 21-30 year FRM >80-972018-8 $12,784,981,984 $44,747,437 $191,774,730 0.35% 1.50% 8.52 9/1/2018 7.5 years 15-20 year FRM >75-972019-1 $11,764,400,689 $70,586,404 $382,343,022 0.60% 3.25% 14.52 2/1/2019 10 years 21-30 year FRM >60-802019-2 $17,903,736,311 $107,422,418 $581,871,430 0.60% 3.25% 14.88 2/1/2019 10 years 21-30 year FRM >80-97

2019 FE -1** $8,000,000,000 $40,000,000 $260,000,000 0.50% 3.25% 15.60 5/1/2019 10.5 years 21-30 year FRM >60-802019 FE -2** $6,000,000,000 $30,000,000 $195,000,000 0.50% 3.25% 17.04 5/1/2019 10.5 years 21-30 year FRM >80-97

2019 LR FE -1** $1,749,904,560 $43,747,614 $153,991,601 2.50% 8.80% 48.96 6/1/2019 10.5 years 21-30 year FRM >80-972019-3 $14,758,880,982 $59,035,524 $479,663,632 0.40% 3.25% 16.68 8/1/2019 12.5 years 21-30 year FRM >60-802019-4 $10,457,116,289 $41,828,465 $392,141,861 0.40% 3.75% 17.76 9/1/2019 12.5 years 21-30 year FRM >80-972019-5 $18,541,320,511 $27,811,981 $241,037,167 0.15% 1.30% 8.88 10/1/2019 9 years 15-20 year FRM >70-972020-1 $18,454,052,550 $64,589,184 $553,621,577 0.35% 3.00% 13.56 1/1/2020 12.5 years 21-30 year FRM >60-802020-2 $12,205,127,867 $48,820,511 $427,179,475 0.40% 3.50% 15.72 1/1/2020 12.5 years 21-30 year FRM >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 21-30 year FRM >60-80FE 2020-2** $16,440,397,951 $65,761,592 $600,074,525 0.40% 3.65% 16.80 2/1/2020 13 years 21-30 year FRM >80-97

https://www.fanniemae.com/resources/file/credit-risk/pdf/cirt-deal-pricing-information.pdf


(CIRT 2020-1)Insurance Policy Key Terms – Sample

Insurance Structure: Aggregate excess of loss credit insurance

Covered Loans: Portfolio of 21 to 30-year fixed-rate residential mortgage loans acquired 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

Step-Down of Limit Liability:

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 %; 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, oriv. 300% of (SDQ+REO) UPB at years 3 and 4, or v. 200% of (SDQ+REO) UPB at year 5 – Term

Cancellation:12.5-year term. Fannie Mae may terminate coverage on/after the 5-year anniversary, and early termination fee paid if early termination option exercised between 5-year and 10-year anniversary.


$2k Net Loss$33k Primary MI Recovery

(30% of (UPB + DQ Int +

Expenses))

Equity

Default(2 missed payments) Mediation Foreclosure Date

Property Disposition Date

Foreclosure Proceedings(Typically initiated on 3rd missed

payment)

REO ProcessLoss Applied to CIRT Structure

$100k Home(95% LTV)

Delinquent Accrued Interest(2)

Maintenance & Preservation(2),(3)

Legal Costs(2),(3)

Real Estate Taxes/Fees(2),(3)

Example of Loan Level Overview of Covered Loss

$95k Unpaid

Principal Balance (UPB)(1)

$15k Interest and expenses

$108k Sale Proceeds +

MI Recovery$75k Sale

Proceeds

(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


= (Default UPB + DQ Interest + Allowable Expenses) x MI Coverage %

How MI Works: Typical Loan

Loan Origination Last Paid Installment

ForeclosureDate

PropertyDisposition Date

ClaimPaid

• DQ Interest*• Foreclosure Costs **• Asset Recovery Costs **• Associated Taxes **• Misc.**

Foreclosure Expenses Accrued

• Property Preservation• Associated Taxes• Misc.

Disposition Expenses Accrued

MI Benefit Settled with the

“Percentage Option”

The claim must be “perfected” (received all required documentation) within 120 days of claim filing, and settled within 180 days of the “perfect date”.

Servicer files claim within 60 days of

Foreclosure

Servicer Informs MI of 60-day DQ

Residual loss (net of MI Benefit) applied to CIRT structure 90 days after property disposition

Potential MI Cancellation due to:• Loan amortizes to 78% of

original home value (automatic)• Property balance reduced to

80% of original value (borrower-initiated)

• Current property valuation (borrower-initiated)

Loan must be current and meet other requirements

MI Coverage acquired by Lender

Fannie Mae’s requirement for MI Coverage Percent determined by Original LTV

* The covered loss may be curtailed based upon eligibility under MI policy** The covered loss may be estimated under MI factor


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

Disaster event

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

How MI Works

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 through MI cancellation?

Yes No No

MI cancellation provision

Must be automatically canceled, e.g., when LTV ratio scheduled to reach 78%

May be canceled by borrower based upon paydown of loan or property appreciation

None – coverage exists for life of loan

None, although coverage is for a 10-year term

Length / term of coverage

Terminates upon cancellation (see MI cancellation provisions above)

Life of Loan

10 years, but the policy remains in effect for all loans that are delinquent as of the 120th month of the policy until they fully cure

Policy Approved MI companies, selected by borrower/lender

Approved MI Companies, selected by borrower/lender

Negotiated policy, insurer selected by 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


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:

Prior to July 20, 2019 New applications on or after July 20, 2019

Borrower income limit requirements

Borrowers’ total annual qualifying income may not exceed

100%of the area median income (AMI) for the

property’s location

Borrowers’ total annual qualifying income may not exceed

80%of the area median income (AMI) for the

property’s location

Properties in low-income census tracts No limitation on borrower income if subject property is located in a low-

income census tract

Borrowers’ total annual qualifying income may not exceed 80% of the area median income (AMI) for the property’s location

Share of CAS 2020-R02 HomeReady UPB 94.8% 5.2%

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.

High Loan-to-Value Refinance Offering


DU File Submission

Step One Step Two Step FourThe offering applies to mortgage loans acquired by Fannie Mae that were originated on or after October 1, 2017.

For the loan to be eligible for the offering, at least 15 months must have passed from the note date of the loan being refinanced to the note date of the new loan.

(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.

Reduced monthly payment

The refinance must provide one or more of these borrower benefits

Lower interest rate

Shorter amortization term

More stable mortgage product, such as moving from an adjustable-rate mortgage to a fixed-rate mortgage

https://www.fanniemae.com/content/eligibility_information/eligibility-matrix.pdf

Innovation with Collateral Underwriter


Fannie Mae’s appraisal waiver, formerly known as Property Inspection Waiver, leverages DU and CU in an integrated fashion to offer appraisal waivers for certain lower-risk eligible loans.

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

DU file submission

DU eligibility

exclusion checks

CU eligibility

exclusion checksWaiver offered

Part of Fannie Mae’s commitment to simplifying the complexity of mortgage origination by creating efficiencies and delivering innovations, leveraging data.

Contact Us

For more information, please 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.

@fanniemae

www.facebook.com/fanniemae

@fanniemae.com

800-2FANNIE (800-232-6643)

[email protected]

By Mail:

Fannie Maec/o Treasurer’s Office, Fixed-Income Securities Marketing, 1100 15th Street NWWashington, DC 20005

Fannie Mae is headquartered in Washington DCand operates regional offices in Atlanta, Chicago, Plano, Los Angeles, and Philadelphia.

Headquarters1100 15th Street NWWashington, DC 20005


single-family credit insurance risk transfer - …...credit insurance risk transfer tm (cirt tm)...

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