Transaction involves $8.2 billion in single-family mortgages
Fannie Mae has completed a new Credit Insurance Risk Transfer (CIRT) transaction, transferring $337.2 million of mortgage credit risk to private insurers and reinsurers.
The transaction (CIRT 2024-L3), which became effective on May 1, involved roughly 24,000 single-family mortgage loans with an unpaid principal balance of around $8.2 billion.
The covered loan pool has loan-to-value (LTV) ratios between 60.01% and 80.00%. These loans were acquired between July and September 2023 and consist of fixed-rate, fully amortizing 30-year term mortgages, underwritten with rigorous credit standards and enhanced risk controls.
“We appreciate the support of the 27 insurers and reinsurers that committed to write coverage on this deal,” Rob Schaefer, vice president of capital markets at Fannie Mae, said in a news release.
Under the terms of CIRT 2024-L3, Fannie Mae will retain risk for the first 170 basis points of loss on the $8.2 billion covered loan pool, equivalent to a $139.8 million retention layer. If this layer is exhausted, the 27 insurers and reinsurers will cover the next 410 basis points of loss, up to a maximum coverage of $337.2 million.
The coverage is provided based on actual losses for an 18-year term. However, the coverage amount may be reduced at the first anniversary and each month after that, depending on the paydown of the insured pool and the principal amounts of insured loans that become seriously delinquent. Fannie Mae retains the option to cancel the coverage on or after the fifth anniversary of the effective date by paying a cancelation fee.
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Since its inception, Fannie Mae has acquired approximately $27.6 billion of insurance coverage on $921.6 billion of single-family loans through the CIRT program. As of March 30, a reference pool for a credit risk transfer transaction included about $1.33 trillion in outstanding unpaid principal balance of loans in Fannie Mae’s single-family conventional guaranty book of business.
To promote transparency and aid insurers and reinsurers in evaluating the CIRT program, Fannie Mae provides ongoing disclosure data and access to resources through its credit risk transfer webpages. This includes the Data Dynamics tool, which allows market participants to analyze both current CIRT deals and Fannie Mae’s historical loan dataset.
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