Fannie Mae has executed its fourth Credit Insurance Risk Transfer (CIRT) transaction of 2023.
As part of Fannie Mae’s ongoing effort to reduce taxpayer risk by increasing the role of private capital in the mortgage market, CIRT 2023-4 transaction transferred $501.6 million of mortgage credit risk to private insurers and reinsurers.
Fannie Mae has acquired approximately $24 billion of insurance coverage on $806 billion of single-family loans through the CIRT program since its inception.
Rob Schaefer, Fannie Mae Vice President, Capital Markets, commented: “We appreciate our continued partnership with the 21 insurers and reinsurers that have committed to write coverage for this deal.”
According to the firm, the covered loan pool for CIRT 2023-4 consists of approximately 40,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $12.9 billion.
The covered pool includes collateral with loan-to-value (LTV) ratios of 60.01 percent to 80.00 percent acquired between March 2022 and May 2022.
Fannie Mae will retain risk for the first 105 basis points of loss on the $12.9 billion covered loan pool, with 21 reinsurers covering the next 390 basis points of loss on the pool, up to a maximum coverage of $501.6 million.
Coverage for this deal is provided based on 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 canceled by Fannie Mae at any time on or after the five-year anniversary of the effective date by paying a cancellation fee.
As of December 31, 2022, approximately $1.1 trillion 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.