Fannie Mae has executed its first Credit Insurance Risk Transfer (CIRT) transaction of 2023, CIRT 2023-1 which transferred $407.5 million of mortgage credit risk to private insurers and reinsurers.
Fannie Mae made the CIRT as part of its ongoing effort to reduce taxpayer risk by increasing the role of private capital in the mortgage market. Since inception to date, Fannie Mae has acquired approximately $22.6 billion of insurance coverage on $761 billion of single-family 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’s VP of 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 (UPB) of approximately $11.8 billion. The covered pool includes collateral with loan-to-value (LTV) ratios of 60.01% to 80% 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.
Through CIRT 2023-1, 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 Fannie Mae’s single-family conventional guaranty book of business were included in a reference pool for a credit risk transfer transaction. In order 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.