Leading U.S. mortgage industry player Fannie Mae has successfully executed its eighth Credit Insurance Risk Transfer (CIRT) transaction of 2023, transferring $344.3 million in mortgage credit risk to private insurers and reinsurers.
Rob Schaefer, Vice President of Capital Markets at Fannie Mae, expressed appreciation for the continued support of the 24 insurers and reinsurers who participated in this deal.
The covered loan pool for CIRT 2023-8 comprised approximately 27,000 single-family mortgage loans, with an outstanding unpaid principal balance totaling approximately $8.4 billion.
These loans, acquired between September 2022 and December 2022, featured loan-to-value (LTV) ratios ranging from 60.01 percent to 80.00 percent.
Notably, the loans were fixed-rate, typically with 30-year terms, and fully amortising mortgages. They were underwritten using stringent credit standards and enhanced risk controls.
Under the terms of CIRT 2023-8, which took effect on August 1, 2023, Fannie Mae retained risk for the first 140 basis points of loss on the $8.4 billion covered loan pool.
In the event this $117.6 million retention layer is exhausted, 24 reinsurers will provide coverage for the next 410 basis points of loss on the pool, up to a maximum of $344.3 million.
Coverage for this transaction is determined based on actual losses and is set to last for a 12.5-year term. Depending on factors such as the paydown of the insured pool and the principal amount of insured loans that become seriously delinquent, the coverage amount may be adjusted starting from the one-year anniversary and subsequently on a monthly basis.
Furthermore, Fannie Mae retains the option to cancel coverage at any time after the five-year anniversary of the effective date by paying a cancellation fee.
To date, Fannie Mae has acquired approximately $25.6 billion in insurance coverage for $858.7 billion worth of single-family loans through the CIRT program, calculated at the time of issuance for both post-acquisition (bulk) and front-end transactions.
As of June 30, 2023, the reference pool for a credit risk transfer transaction included approximately $1.27 trillion in outstanding unpaid principal balance of loans within Fannie Mae’s single-family conventional guaranty book of business.
