The Federal National Mortgage Association (Fannie Mae) has executed two new Credit Insurance Risk Transfer (CIRT) transactions transferring $709 million of mortgage credit risk to private insurers and reinsurers.
Rob Schaefer, Vice President, Capital Markets, Fannie Mae, commented, “We appreciate the support of the 25 insurers and reinsurers that committed to write coverage on these deals.”
The two transactions are CIRT 2024-L2 and CIRT 2024-H1. The covered loan pool for CIRT 2024-L2 consisting of approximately 30,000 single-family mortgage loans with an outstanding unpaid principal balance (UPB) of approximately $9.9 billion.
Additionally, the covered pool collateral has loan-to-value (LTV) ratios of 60.01-80% and was acquired between April 2023 and July 2023.
The loans for both transactions are fixed-rate, generally 30-year terms and fully amortizing mortgages. With CIRT 2024-L2, effective February 1st, 2024, Fannie Mae will retain risk for the first 160 basis points of loss on the $9.9 billion covered loan pool. In case the $158.3 million retention layer is exhausted, 25 insurers and reinsurers will cover the next 410 basis points of loss on the pool, up to a maximum coverage of $405.7 million.
With CIRT 2024-H1, which also became effective February 1st, 2024, Fannie Mae will retain risk for the first 175 basis points of loss on the $12.1 billion covered loan pool. However, if the $212.3 million retention layer is exhausted, 23 insurers and reinsurers will cover the next 250 basis points of loss on the pool, up to a maximum coverage of $303.4 million.
The coverage for these deals is provided based on actual losses for 18 years. Depending on the paydown of the insured pools and the principal amounts of insured loans that become seriously delinquent, the coverage amounts may be reduced at the first anniversary and each month thereafter.
Fannie Mae withholds the right to cancel the coverage on these deals at any time on or after the fifth anniversary of the effective date by paying a cancellation fee.
To date, Fannie Mae has acquired approximately $26.9 billion of insurance coverage on $901.2 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 December 31, 2023, the company has approximately $1.29 trillion in outstanding UPB of loans in its single-family conventional guaranty book of business that were included in a reference pool for a credit risk transfer transaction.
