Recently, Fannie Mae transferred $926 million of mortgage credit risk to private insurers and reinsurers through two Credit Insurance Risk Transfer (CIRT) transactions, namely CIRT 2023-2 and CIRT 2023-3. Since its inception, the CIRT program has provided insurance coverage of around $23.5 billion for Fannie Mae on $793 billion worth of single-family loans.
CIRT 2023-2 and CIRT 2023-3 cover loan pools of around 44,000 and 54,000 single-family mortgage loans, respectively. The former has an unpaid principal balance of roughly $13.8 billion with collateral LTV ratios of 60.01% to 80%, while the latter has an unpaid principal balance of about $18 billion with collateral LTV ratios of 80.01% to 97%. Both pools were acquired between January and March 2022.
Under CIRT 2023-2, Fannie Mae will hold the initial 95 basis points of loss on the $13.8 billion covered loan pool, followed by 19 reinsurers covering the next 365 basis points of loss, not exceeding $503.5 million. Under CIRT 2023-3, Fannie Mae will hold the initial 100 basis points of loss on the $18 billion covered loan pool, followed by 18 reinsurers covering the next 235 basis points of loss, not exceeding $422.5 million.
Fannie Mae’s recent Credit Insurance Risk Transfer (CIRT) transactions were made possible by partnerships with 20 insurers and reinsurers, providing coverage for a term of 12.5 years. Coverage amounts may be reduced based on actual losses, and Fannie Mae can cancel coverage after the five-year mark for a fee.
As of December 31, 2022, approximately $1.1 trillion in outstanding unpaid balance 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. Both transactions include 30-year fixed-rate fully amortizing mortgages, which underwent strict underwriting standards and risk controls to ensure their quality.