Fannie Mae has executed its fifth Credit Insurance Risk Transfer (CIRT) transaction of 2023.
As part of the firm’s ongoing effort to reduce taxpayer risk by increasing the role of private capital in the mortgage market, CIRT 2023-5 transferred $424.4m of mortgage credit risk to private insurers and reinsurers.
Since inception to date, Fannie Mae has acquired approximately $24.5bn of insurance coverage on $823.7bn 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,” said Rob Schaefer, Fannie Mae Vice President, Capital Markets.
According to the announcement, the covered loan pool for CIRT 2023-5 – effective as of April 1, 2023 – consists of approximately 53,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $18.1bn
The covered pool includes collateral with loan-to-value (LTV) ratios of 80.01% to 97.00% acquired between March 2022 and June 2022.
The loans included in this transaction are fixed-rate, generally 30-year term, fully amortising mortgages and were underwritten using rigorous credit standards and enhanced risk controls.
With CIRT 2023-5 Fannie Mae will retain risk for the first 135 basis points of loss on the $18.1bn covered loan pool.
If the $243.8m retention layer is exhausted, 19 reinsurers will cover the next 235 basis points of loss on the pool, up to a maximum coverage of $424.4m, the firm added.
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 cancelled by Fannie Mae at any time on or after the five-year anniversary of the effective date by paying a cancellation fee, the firm added.
As of March 31, 2023, approximately $1.17tn 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.
