Reinsurance News

Fannie Mae executes its final CIRT transaction of 2023

21st November 2023 - Author: Jack Willard

The Federal National Mortgage Association, (Fannie Mae) has executed its ninth and final Credit Insurance Risk Transfer (CIRT) transaction of 2023, transferring $270.7 million of mortgage credit risk to private insurers and reinsurers.

Year to date, the firm has acquired approximately $3.66 billion of insurance coverage on $121 billion of single-family loans from nine CIRT deals issued across 2023.

The covered loan pool for CIRT 2023-9 consists of approximately 34,000 single-family mortgage loans with an outstanding unpaid principal balance totaling approximately $11.5 billion.

In addition, the covered pool includes collateral with loan-to-value (LTV) ratios of 80.01 percent to 97.00 percent acquired between October 2022 and December 2022.

Fannie Mae also confirmed that the loans included in this transaction are fixed-rate, generally 30-year term and fully amortizing mortgages using rigorous credit standards and enhanced risk controls.

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Rob Schaefer, Fannie Mae Vice President, Capital Markets, commented: “We appreciate the continued support of the 21 insurers and reinsurers that have committed to write coverage for this deal.”

Devang Doshi, Fannie Mae Senior Vice President, Capital Markets, said: “As the market continues to adjust to evolving macroeconomic conditions, the engagement from our reinsurer partners has been instrumental to close out another successful year.”

Under the terms of CIRT 2023-9, which took effect on September 1, 2023, Fannie Mae will retain risk for the first 165 basis points of loss on the $11.5 billion covered loan pool.

However, in the event this $190 million retention layer is exhausted, 21 reinsurers will cover the next 235 basis points of loss on the pool, up to a maximum coverage of $270.7 million.

Moreover, coverage for this transaction is determined based upon actual losses, and is set to last for a term of 12.5 years. Depending on a several 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 reduced at the one-year anniversary and each month thereafter.

Fannie Mae also retains the option to cancel the coverage on this deal at any time on or after the five-year anniversary of the effective date by paying a cancellation fee.

To date, Fannie Mae has acquired approximately $25.9 billion of insurance coverage on $870.2 billion of single-family loans through the CIRT program, measured at the time of issuance for both post-acquisition (bulk) and front-end transactions.

As of September 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.

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