Fannie Mae says it has executed two Credit Insurance Risk Transfer (CIRT) transactions. As part of Fannie Mae’s ongoing effort to reduce taxpayer risk by increasing the role of private capital in the mortgage market, CIRT 2023-2 and CIRT 2023-3 transferred a combined $926 million of mortgage credit risk to private insurers and reinsurers.
The covered loan pool for CIRT 2023-2 consists of approximately 44,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $13.8 billion. The covered pool includes collateral with loan-to-value (LTV) ratios of 60.01% to 80.00% acquired between February 2022 and March 2022. The loans included in this transaction are fixed-rate, generally 30-year term, fully amortizing mortgages and were underwritten using rigorous credit standards and enhanced risk controls.
The covered loan pool for CIRT 2023-3 consists of approximately 54,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $18 billion. The covered pool includes collateral with LTV ratios of 80.01% to 97.00% acquired between January 2022 and March 2022. The loans included in this transaction are fixed-rate, generally 30-year term, fully amortizing mortgages and were underwritten using rigorous credit standards and enhanced risk controls.
With CIRT 2023-2, which became effective February 1, 2023, Fannie Mae will retain risk for the first 95 basis points of loss on the $13.8 billion covered loan pool. If the $131 million retention layer is exhausted, 19 reinsurers will cover the next 365 basis points of loss on the pool, up to a maximum coverage of $503.5 million.
With CIRT 2023-3, which also became effective February 1, 2023, Fannie Mae will retain risk for the first 100 basis points of loss on the $18 billion covered loan pool. If the $179.8 million retention layer is exhausted, 18 reinsurers will cover the next 235 basis points of loss on the pool, up to a maximum coverage of $422.5 million.
Coverage for these deals is provided based upon actual losses for a term of 12.5 years. Depending on the paydown of the insured pools and the principal amount of insured loans that become seriously delinquent, the aggregate coverage amounts may be reduced at the one-year anniversary and each month thereafter. The coverage on these deals may be canceled by Fannie Mae at any time on or after the five-year anniversary of the effective date by paying a cancellation fee.
Since inception to date, Fannie Mae has acquired approximately $23.5 billion of insurance coverage on $793 billion of single-family loans through the CIRT program, measured at the time of issuance for both post-acquisition (bulk) and front-end transactions.
“We appreciate our continued partnership with the 20 insurers and reinsurers that have committed to write coverage for these deals,” says Rob Schaefer, Fannie Mae vice president, capital markets.
