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Fannie Mae Executes 5th Credit Insurance Risk Transfer Of 2023

David Krechevsky
May 18, 2023
Fannie Mae Building

Covered loan pool includes about 53,000 single-family mortgage loans with a UPB of approximately $18.1 billion.

Fannie Mae said Thursday it has executed its fifth 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 2023-5 transferred $424.4 million of mortgage credit risk to private insurers and reinsurers. 

Since its inception, Fannie Mae has acquired approximately $24.5 billion of insurance coverage on $823.7 billion of single-family loans through the CIRT program, measured at the time of issuance for both post-acquisition (bulk) and front-end transactions, the government-sponsored enterprise said. 

“We appreciate our continued partnership with the 19 insurers and reinsurers that have committed to write coverage for this deal,” said Rob Schaefer, Fannie Mae vice president, capital markets.

The covered loan pool for CIRT 2023-5 consists of approximately 53,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $18.1 billion. The covered pool includes collateral with loan-to-value (LTV) ratios of 80.01% to 97% acquired between March and June 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, Fannie Mae said.

With CIRT 2023-5, which became effective April 1, Fannie Mae will retain risk for the first 135 basis points of loss on the $18.1 billion covered loan pool. If the $243.8 million retention layer is exhausted, 19 reinsurers will cover the next 235 basis points of loss on the pool, up to a maximum coverage of $424.4 million.

Coverage for this deal is provided based upon actual losses for a term of 12.5 years, Fannie Mae said. 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, it said. Coverage on the 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 March 31,approximately $1.17 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, it said.

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