Fannie Mae executes its final CIRT transaction of 2023

The Federal National Mortgage Association, (Fannie Mae) has executed its ninth and final Credit Insurance Risk Transfer (CIRT) transaction of 2023, transferring $270.7 million of mortgage credit risk to private insurers and reinsurers.

Year to date, the firm has acquired approximately $3.66 billion of insurance coverage on $121 billion of single-family loans from nine CIRT deals issued across 2023.

The covered loan pool for CIRT 2023-9 consists of approximately 34,000 single-family mortgage loans with an outstanding unpaid principal balance totaling approximately $11.5 billion.

In addition, the covered pool includes collateral with loan-to-value (LTV) ratios of 80.01 percent to 97.00 percent acquired between October 2022 and December 2022.

Fannie Mae also confirmed that the loans included in this transaction are fixed-rate, generally 30-year term and fully amortizing mortgages using rigorous credit standards and enhanced risk controls.

Rob Schaefer, Fannie Mae Vice President, Capital Markets, commented: “We appreciate the continued support of the 21 insurers and reinsurers that have committed to write coverage for this deal.”

Devang Doshi, Fannie Mae Senior Vice President, Capital Markets, said: “As the market continues to adjust to evolving macroeconomic conditions, the engagement from our reinsurer partners has been instrumental to close out another successful year.”

Under the terms of CIRT 2023-9, which took effect on September 1, 2023, Fannie Mae will retain risk for the first 165 basis points of loss on the $11.5 billion covered loan pool.

However, in the event this $190 million retention layer is exhausted, 21 reinsurers will cover the next 235 basis points of loss on the pool, up to a maximum coverage of $270.7 million.

Moreover, coverage for this transaction is determined based upon actual losses, and is set to last for a term of 12.5 years. Depending on a several factors, such as the paydown of the insured pool and the principal amount of insured loans that become seriously delinquent, the coverage amount may be reduced at the one-year anniversary and each month thereafter.

Fannie Mae also retains the option to cancel the coverage on this deal at any time on or after the five-year anniversary of the effective date by paying a cancellation fee.

To date, Fannie Mae has acquired approximately $25.9 billion of insurance coverage on $870.2 billion of single-family loans through the CIRT program, measured at the time of issuance for both post-acquisition (bulk) and front-end transactions.

As of September 30, 2023, the reference pool for a credit risk transfer transaction included approximately $1.27 trillion in outstanding unpaid principal balance of loans within Fannie Mae’s single-family conventional guaranty book of business.

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