Fannie Mae [1] has announced that it has executed its fourth Credit Insurance Risk Transfer (CIRT) [2] 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 [3] transferred $501.6 million of mortgage credit risk to private insurers and reinsurers.
Since inception to date, Fannie Mae has acquired approximately $24 billion of insurance coverage on $806 billion of single-family loans through the CIRT program, measured at the time of issuance for both post-acquisition (bulk) and front-end transactions.
"We appreciate our continued partnership with the 21 insurers and reinsurers that have committed to write coverage for this deal," said Rob Schaefer, Fannie Mae’s VP of Capital Markets [4].
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% to 80% acquired between March 2022 and May 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 2023-4, which became effective March 1, 2023, Fannie Mae will retain risk for the first 105 basis points of loss on the $12.9 billion covered loan pool. If the $135 million retention layer is exhausted, 21 reinsurers will cover the next 390 basis points of loss on the pool, up to a maximum coverage of $501.6 million.
Coverage for CIRT 2023-4 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.
Execution of CIRT 2023-4 follows the closing of CIRT 2023-2 and CIRT 2023-3 [5], which transferred a combined $926 million of mortgage credit risk to private insurers and reinsurers.
With CIRT 2023-2, which became effective February 1, 2023, Fannie Mae will retain risk for the first 95 basis points of loss on the $13.8 billion covered loan pool. If the $131 million retention layer is exhausted, 19 reinsurers will cover the next 365 basis points of loss on the pool, up to a maximum coverage of $503.5 million. CIRT 2023-3, which also became effective February 1, 2023, Fannie Mae will retain risk for the first 100 basis points of loss on the $18 billion covered loan pool. If the $179.8 million retention layer is exhausted, 18 reinsurers will cover the next 235 basis points of loss on the pool, up to a maximum coverage of $422.5 million.
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.