Mortgage credit risk moves to insurers and reinsurers
Fannie Mae has announced the execution of a new Credit Insurance Risk Transfer (CIRT) transaction. CIRT 2024-H3 transferred $160.9 million of mortgage credit risk to private insurers and reinsurers.
“We appreciate the support of the 25 insurers and reinsurers that committed to write coverage on this deal,” said Rob Schaefer, Fannie Mae vice president, capital markets.
The loan pool covered by CIRT 2024-H3 includes around 19,000 single-family mortgage loans with an outstanding unpaid principal balance (UPB) of approximately $6.4 billion. The collateral in the covered pool has loan-to-value (LTV) ratios ranging from 80.01% to 97.00% and was acquired between October 2023 and December 2023. The loans in this transaction are fixed-rate, typically 30-year term, fully amortizing mortgages, all underwritten using credit standards and enhanced risk controls.
Effective August 1, 2024, CIRT 2024-H3 lets Fannie Mae retain risk for the first 185 basis points of loss on the $6.4 billion covered loan pool. Furthermore, 25 insurers and reinsurers will take on the next 250 basis points of loss if the $119 million retention layer is exhausted.
Coverage for the transaction is based on actual losses over an 18-year term. The coverage amount can be adjusted annually based on the paydown of the insured pool and the principal amounts of seriously delinquent loans. Fannie Mae can also cancel the coverage any time after the fifth anniversary by paying a cancelation fee.
Since its inception, Fannie Mae has obtained around $27.7 billion of insurance coverage on $928 billion of single-family loans through the CIRT program, measured at issuance for both post-acquisition (bulk) and front-end transactions. As of June 30, 2024, about $1.35 trillion in outstanding UPB of loans in the single-family conventional guaranty book of business were included in a reference pool for a credit risk transfer transaction.
