Covered loan pool includes about 27,000 mortgage loans
Fannie Mae recently executed its eighth Credit Insurance Risk Transfer™ (CIRT™) transaction of 2023, transferring $344.3 million of mortgage credit risk to private insurers and reinsurers.
“We appreciate the continued support of the 24 insurers and reinsurers that have committed to write coverage for this deal,” said Rob Schaefer, vice president of capital markets at Fannie Mae.
What comprises the covered loan pool?
The covered loan pool for CIRT 2023-8 consists of around 27,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $8.4 billion. This includes collateral with loan-to-value (LTV) ratios of 60.01%-80.00% acquired between September 2022 and December 2022. The loans in this transaction are fixed-rate and are generally 30-year term, fully amortizing mortgages and were underwritten using rigorous credit standards and enhanced risk controls.
Fannie Mae will retain risk for the first 140 basis points of loss on the $8.4 billion covered loan pool with CIRT 2023-8, which became effective August 1, 2023. If the $117.6 million retention layer is exhausted, 24 reinsurers will cover the next 410 basis points of loss on the pool, up to a maximum coverage of $344.3 million.
For this deal, the coverage is based on actual losses for a term of 12.5 years. The coverage amount may be reduced at the one-year anniversary and each month subsequently depending on the paydown of the insured pool and the principal amount of insured loans that become severely delinquent. Fannie Mae may cancel the coverage at any time, or after the five-year anniversary of the effective date by paying a cancellation fee.
Since founding, Fannie Mae has acquired approximately $25.6 billion of insurance coverage on $858.7 billion of single-family loans through the CIRT program, measured at the time of issuance for both post-acquisition and front-end transactions. In a news release, Fannie Mae reported that by June 2023, approximately $1.27 trillion in outstanding unpaid principal balance of loans in single-family conventional guaranty book of business were included in a reference pool for a credit risk transfer transaction.
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