Fannie Mae (OTCQB: FNMA) announced today that it has executed its first 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 2023-1 transferred $407.5 million of mortgage credit risk to private insurers and reinsurers. Since inception to date, Fannie Mae has acquired approximately $22.6 billion of insurance coverage on $761 billion of single-family (SF) loans through the CIRT program, measured at the time of issuance for both post-acquisition (bulk) and front-end transactions.
“CIRT 2023-1 begins another active year of CIRT issuance for Fannie Mae. We appreciate our continued partnership with the 22 insurers and reinsurers who have committed to write coverage for this deal,” said Rob Schaefer, Fannie Mae Vice President for Capital Markets.
The covered loan pool for CIRT 2023-1 consists of approximately 35,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $11.8 billion. The covered pool includes collateral with loan-to-value (LTV) ratios of 60.01 percent to 80.00 percent acquired in January 2022. The loans included in this transaction are fixed-rate, generally 30-year term, fully amortizing mortgages and were underwritten using rigorous credit standards and enhanced risk controls.
With CIRT 2023-1, which became effective January 1, 2023, Fannie Mae will retain risk for the first 75 basis points of loss on the $11.8 billion covered loan pool. If the $88.6 million retention layer is exhausted, 22 reinsurers will cover the next 345 basis points of loss on the pool, up to a maximum coverage of $407.5 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 December 31, 2022, approximately $1.1 trillion in outstanding UPB of loans in our single-family conventional guaranty book of business were included in a reference pool for a credit risk transfer transaction.
To promote transparency and to help insurers and reinsurers evaluate the CIRT program, Fannie Mae provides ongoing, robust disclosure data, as well as access to news, resources, and analytics through its credit risk transfer webpages. This includes Fannie Mae’s innovative Data Dynamics® tool that enables market participants to interact with and analyze both CIRT deals that are currently outstanding in the market and Fannie Mae’s historical loan dataset. For more information on individual CIRT transactions, including pricing, please visit our Credit Insurance Risk Transfer webpage.
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