Fannie Mae Executes Two Credit Insurance Risk Transfer Transactions on $22.0 Billion of Single-Family Loans

By klrw460 April 4, 2024

Fannie Mae announced the completion of two Credit Insurance Risk Transfer transactions, CIRT 2024-L2 and CIRT 2024-H1, transferring $709 million of mortgage credit risk to private insurers. According to Rob Schaefer, Vice President of Capital Markets at Fannie Mae, the firm values the commitment from the 25 participating insurance companies.

CIRT 2024-L2 covers around 30,000 single-family mortgage loans, totaling about $9.9 billion in unpaid principal, with loan-to-value ratios between 60.01% and 80%. These mortgages, accrued between April and July 2023, adhere to stringent underwriting standards. Similarly, CIRT 2024-H1 involves around 35,000 loans with an unpaid balance of $12.1 billion, featuring loan-to-value ratios from 80.01% to 97%, gathered from January to May 2023.

For CIRT 2024-L2, starting February 1, 2024, Fannie Mae holds the initial risk up to 160 basis points on the $9.9 billion pool. Should losses exceed this, a group of 25 insurers will cover further losses up to $405.7 million. CIRT 2024-H1 also began on February 1, 2024, with Fannie Mae retaining the first 175 basis points of loss on a $12.1 billion pool, after which 23 insurers will handle additional losses up to $303.4 million.

The coverage terms last for 18 years, adjusting based on the paydown of the insured pools or if loans become significantly delinquent. Fannie Mae may terminate the coverage after five years by paying a cancellation fee.

Since its start, Fannie Mae has secured about $26.9 billion in insurance coverage on $901.2 billion worth of single-family loans through the CIRT program. As of the end of 2023, $1.29 trillion in outstanding loans were part of a credit risk transfer transaction within Fannie Mae’s portfolio.

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