Fannie Mae Transfers $270+ Million in Mortgage Credit Risk to Private Insurers

Fannie Mae has executed its ninth and final Credit Insurance Risk Transfer (CIRT) transaction of 2023, CIRT 2023-9, which transferred $270.7 million of mortgage credit risk to private insurers and reinsurers. Year-to-date, Fannie Mae has acquired approximately $3.66 billion of insurance coverage on $121 billion of single-family loans from nine CIRT deals issued in 2023.

"We appreciate the continued support of the 21 insurers and reinsurers that have committed to write coverage for this deal," said Rob Schaefer, Fannie Mae VP, Capital Markets.

The covered loan pool for CIRT 2023-9 consists of approximately 34,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $11.5 billion. The covered pool includes collateral with loan-to-value (LTV) ratios of 80.01% to 97% acquired between October 2022 and December 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 2023-9, which became effective September 1, 2023, Fannie Mae will retain risk for the first 165 basis points of loss on the $11.5 billion covered loan pool. If the $190 million retention layer is exhausted, 21 reinsurers will cover the next 235 basis points of loss on the pool, up to a maximum coverage of $270.7 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 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.

Since inception to date, Fannie Mae has acquired approximately $25.9 billion of insurance coverage on $870.2 billion of single-family loans through the CIRT program, measured at the time of issuance for both post-acquisition (bulk) and front-end transactions. As of September 30, 2023, approximately $1.27 trillion in outstanding unpaid principal balance of loans in our single-family conventional guaranty book of business were included in a reference pool for a credit risk transfer transaction.

"As the market continues to adjust to evolving macroeconomic conditions, the engagement from our reinsurer partners has been instrumental to close out another successful year," said Devang Doshi, Fannie Mae SVP, Capital Markets.

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.

Fannie Mae recently celebrated the 10^th anniversary of the CIRT program, an initiative launched to offload risky loans to investors which in turn helps taxpayers and helps the GSE provide opportunities for investors and reinsurers to invest in U.S. housing, ultimately helping to build a stronger and more durable housing finance system.

In total, 125 CRT transactions had taken place through its two primary CRT programs: Connecticut Avenue Securities (CAS) and Credit Insurance Risk Transfer (CIRT). Between these two programs, Fannie Mae has offloaded $88 billion of risky mortgages on $2.9 trillion of unpaid principal balances at issuance as of the end of September.

In late September, Fannie Mae executed its eighth CIRT transaction of 2023, CIRT 2023-8, which transferred $344.3 million of mortgage credit risk to private insurers and reinsurers. CIRT transactions transfer credit risk on a pool of loans to an insurance provider, which may then transfer that risk to one or more reinsurers, complementing Fannie Mae's other current risk transfer offerings that leverage the capital markets. The covered loan pool for CIRT 2023-8 consists of approximately 27,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $8.4 billion. The covered pool includes collateral with loan-to-value (LTV) ratios of 60.01% to 80% acquired between September 2022 and December 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.