Fannie Mae, a government-sponsored enterprise and provider of mortgage financing in the United States, has completed a new Credit Insurance Risk Transfer transaction, known as CIRT 2024-L3.
This initiative transferred $337.2 million in mortgage credit risk to private insurers and reinsurers.
“We appreciate the support of the 27 insurers and reinsurers that committed to write coverage on this deal,” commented Rob Schaefer, Fannie Mae Vice President, Capital Markets.
The covered loan pool in CIRT 2024-L3 includes about 24,000 single-family mortgage loans, totalling around $8.2 billion in outstanding unpaid principal balance (UPB).
The loans were acquired between July 2023 and September 2023, and have loan-to-value (LTV) ratios ranging from 60.01 percent to 80.00 percent. They are predominantly fixed-rate with a 30-year term and fully amortising mortgages, and were underwritten using stringent credit standards and enhanced risk controls.
Effective May 1, 2024, Fannie Mae assumes risk for the initial 170 basis points of loss on the $8.2 billion covered loan pool through CIRT 2024-L3.
Beyond Fannie Mae’s retention layer of $139.8 million, 27 insurers and reinsurers will cover the subsequent 410 basis points of loss, up to a maximum of $337.2 million.
Coverage for this arrangement is based on actual losses over an 18-year term. Depending on the paydown and delinquency status of insured loans, the coverage amount may decrease starting from the one-year anniversary and monthly thereafter.
Fannie Mae retains the option to cancel the coverage at any time after the fifth anniversary of the effective date by paying a cancellation fee.
Since its inception, Fannie Mae has secured approximately $27.6 billion in insurance coverage for $921.6 billion of single-family loans through the CIRT programme, measured at issuance for both post-acquisition (bulk) and front-end transactions.
As of March 30, 2024, approximately $1.33 trillion in outstanding UPB of loans in Fannie Mae’s single-family conventional guaranty book of business were included in a reference pool for a credit risk transfer transaction.
