Fannie Mae has successfully executed its sixth and seventh Credit Insurance Risk Transfer (CIRT) transactions for 2023.
CIRT 2023-6 and CIRT 2023-7 transferred a total of $789 million in mortgage credit risk to private insurers and reinsurers.
The transactions were facilitated by Aon plc, a leading global professional services firm, with sub-brokerage services provided by Protecdiv, a certified minority business enterprise (MBE).
Fannie Mae expressed gratitude for the support of the 21 insurers and reinsurers that participated in these transactions. Rob Schaefer, Fannie Mae’s Vice President of Capital Markets, emphasised the importance of their partnership with Aon and the new collaboration with Protecdiv.
Schaefer stated that they hope the involvement of Protecdiv, which focuses on bringing diverse ideas and exceptional service to its clients and partners, will encourage more diverse-led firms to participate in this space.
The covered loan pool for CIRT 2023-6 consists of approximately 30,000 single-family mortgage loans, with an outstanding unpaid principal balance of about $9.65 billion. The loans in this pool were acquired between April 2022 and August 2022 and have loan-to-value (LTV) ratios ranging from 60.01 percent to 80.00 percent.
Similarly, CIRT 2023-7 includes around 51,000 single-family mortgage loans, with an outstanding unpaid principal balance of approximately $16.9 billion. These loans, acquired between July 2022 and September 2022, have LTV ratios between 80.01 percent and 97.00 percent.
Both transactions involve fixed-rate, fully amortizing mortgages underwritten using stringent credit standards and enhanced risk controls.
Aon, which has been serving Fannie Mae since 2014, expressed delight in collaborating with Protecdiv to promote equity, inclusion, and impact.
Joe Monaghan, Global Growth Leader for Aon’s Reinsurance Solutions and CEO of Aon’s Public Sector Partnership, emphasised the shared commitment to diversity and inclusion.
Protecdiv’s Founder and CEO, Kael Coleman, highlighted their dedication to improving society through insurance and supporting Fannie Mae’s mission to enhance diversity in housing finance.
Coleman expressed enthusiasm for future collaborations with Fannie Mae to fulfill the risk transfer and supplier diversity objectives of large U.S. businesses and public entities.
Under the terms of CIRT 2023-6, Fannie Mae will retain risk for the initial 130 basis points of loss on the $9.65 billion covered loan pool. Should the $125 million retention layer be exhausted, 20 reinsurers will cover the subsequent 405 basis points of loss, up to a maximum coverage of $391 million.
For CIRT 2023-7, Fannie Mae will retain risk for the first 155 basis points of loss on the $16.9 billion covered loan pool. If the $262 million retention layer is depleted, 20 reinsurers will cover the following 235 basis points of loss, up to a maximum coverage of $398 million.
The coverage for these transactions will be based on actual losses over a term of 12.5 years. The aggregate coverage amount may decrease on the one-year anniversary and monthly thereafter, depending on the paydown of the insured pool and the principal amount of insured loans that become seriously delinquent.
Fannie Mae retains the option to cancel the coverage on these deals at any time on or after the five-year anniversary of the effective date by paying a cancellation fee.
Since the inception of the CIRT program, Fannie Mae has obtained insurance coverage of approximately $25.2 billion on $850 billion of single-family loans.
As of March 31, 2023, the reference pool for credit risk transfer transactions included around $1.17 trillion in outstanding unpaid principal balance from Fannie Mae’s single-family conventional guaranty book of business.
