Fannie Mae has executed its fifth Credit Insurance Risk Transfer (CIRT) transaction of 2023. As part of Fannie Mae’s ongoing effort to reduce taxpayer risk by increasing the role of private capital in the mortgage market, CIRT 2023-5 transferred $424.4 million of mortgage credit risk to private insurers and reinsurers. Since inception to date, Fannie Mae has acquired approximately $24.5 billion of insurance coverage on $823.7 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 19 insurers and reinsurers that have committed to write coverage for this deal,” says Rob Schaefer, vice president capital markets, Fannie Mae.
The covered loan pool for CIRT 2023-5 consists of approximately 53,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $18.1 billion. The covered pool includes collateral with loan-to-value ratios of 80.01% to 97% percent acquired between March 2022 and June 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 2023-5, which became effective April 1, Fannie Mae will retain risk for the first 135 basis points of loss on the $18.1 billion covered loan pool. If the $243.8 million retention layer is exhausted, 19 reinsurers will cover the next 235 basis points of loss on the pool, up to a maximum coverage of $424.4 million.
Coverage for this deal is provided based upon actual losses for a term of 12.5 years. Depending on the paydown of the insured pool and the principal amount of insured loans that become seriously delinquent, the aggregate coverage amount may be reduced at the one-year anniversary and each month thereafter. The coverage on this deal may be canceled by Fannie Mae at any time on or after the five-year anniversary of the effective date by paying a cancellation fee.