Fannie Mae completed its fifth Credit Insurance Risk Transfer (CIRT) transaction in 2023. This is part of the GSE’s effort to reduce taxpayer risk by increasing private capital’s involvement in the mortgage market.
CIRT 2023-5 sold $424.4 million of mortgage credit risk to private insurers and reinsurers. Fannie Mae has acquired about $24.5 billion of insurance coverage on $823.7 billion of single-family loans since the start of the CIRT program.
The covered loan pool for CIRT 2023-5 includes around 53,000 single-family mortgage loans with an unpaid principal balance of about $18.1 billion.
The pool includes collateral with loan-to-value (LTV) ratios of 80.01 percent to 97.00 percent for loans acquired from March 2022 to June 2022.
The loans in this transaction are fixed-rate, 30-year term, fully amortizing mortgages, and were underwritten using strict credit standards and enhanced risk controls.
Fannie Mae will retain risk for the first 135 basis points of loss on the $18.1 billion covered loan pool. If the $243.8 million retention layer is exhausted, 19 reinsurers will cover the next 235 basis points of loss on the pool, up to a maximum coverage of $424.4 million.
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 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 March 31, 2023, around $1.17 trillion in loans in Fannie Mae’s single-family conventional guaranty book of business were included in a reference pool for a credit risk transfer transaction.
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