Fannie Mae Executes First Credit Insurance Risk Transfer Transaction of 2024 on $9.0 Billion of Single-Family Loans

By klrw460 March 1, 2024

Fannie Mae announced the execution of its first Credit Insurance Risk Transfer (CIRT) transaction for the year 2024, labeled CIRT 2024-L1, effectively transferring $355.6 million of mortgage credit risk to private insurers and reinsurers. Rob Schaefer, the Vice President of Capital Markets at Fannie Mae, highlighted the deal as the commencement of an active year for CIRT issuance and appreciated the involvement of 24 insurers and reinsurers. These parties committed to the deal, supporting an extension of the CIRT maturity term to 18 years, up from the previously standard 12.5-year term employed in most CIRT deals since 2019.

The loan pool covered under CIRT 2024-L1 includes approximately 28,000 single-family mortgage loans, summing up to an outstanding unpaid principal balance of around $9.0 billion. These loans, acquired between January and April 2023, exhibit loan-to-value (LTV) ratios ranging from 60.01% to 80.00%. They are predominantly fixed-rate, 30-year term mortgages that were underwritten to rigorous credit standards and enhanced risk controls.

A new identification system was introduced with this transaction, where deals covering low-LTV loan pools are prefixed with ‘L’, and those covering high-LTV loans with ‘H’. For CIRT 2024-L1, which became effective on January 1, 2024, Fannie Mae retains risk for the first 150 basis points of loss on the covered loan pool. Beyond the $135.1 million retention layer, 24 reinsurers will cover up to 395 basis points of loss on the pool, capping at $355.6 million in coverage.

The coverage provided under this deal is based on actual losses and spans 18 years. However, the coverage amount may be adjusted annually or monthly based on the paydown of the insured pool and the principal amount of loans that become seriously delinquent. Fannie Mae also reserves the right to cancel the coverage after five years by paying a cancellation fee.

To date, Fannie Mae has acquired approximately $26.2 billion of insurance coverage on $879.2 billion of single-family loans through the CIRT program. As of December 31, 2023, around $1.29 trillion in outstanding unpaid principal balance of loans in Fannie Mae’s single-family conventional guaranty book of business were part of a reference pool for a credit risk transfer transaction. Fannie Mae commits to promoting transparency and aiding the evaluation of the CIRT program by providing robust disclosure data, news, resources, and analytics, including access to its innovative Data Dynamics® tool for analyzing CIRT deals and historical loan datasets. Further details on specific CIRT transactions, including pricing, can be found on Fannie Mae’s Credit Insurance Risk Transfer webpage.

For the full details and insights, please refer to the original press release at the following link: https://www.fanniemae.com/newsroom/fannie-mae-news/first-credit-insurance-risk-transfer-transaction-2024