Fannie Mae has finalized its ninth Credit Insurance Risk Transfer (CIRT) transaction of the year, transferring some $700 million of mortgage credit risk to private insurers and reinsurers, the agency announced.
The deal, CIRT 2022-9, involves a covered loan pool of 69,000 single-family mortgages valued at $21 billion. The coverage, which became effective Aug. 1, entails Fannie Mae retaining risk for the first 55 basis points of potential loss on the covered loan pool.
“If the $115 million retention layer is exhausted, 23 insurers and reinsurers will cover the next 335 basis points of loss on the pool, up to a maximum coverage of $700 million,” Fannie Mae states in its announcement of the transaction. The insurance coverage is provided based on actual losses over a 12.5-year term.
Through the CIRT transaction, a portion of the credit risk on mortgages backed by Fannie Mae is shifted to insurers in the private sector. Fannie Mae pays monthly premiums in exchange for insurance coverage on a portion of the designated reference loan pools.
The mortgages in the covered loan pool have loan-to-value ratios ranging from 60.01% to 80%. The loans, acquired in October 2021, are fixed-rate, mostly 30-year term “and were underwritten using rigorous credit standards and enhanced risk controls,” according to Fannie Mae
In total, the nine CIRT deals so far this year provide insurance for potential losses on the covered loan pools up to a maximum of some $6.6 billion on a collective basis. The covered mortgage loan pools in the nine transactions to date include a total of some 635,000 mortgage loans valued collectively at $193 billion — based on a tally of announced CIRT deals.
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Since the CIRT program’s inception in 2013 to date, Fannie Mae has acquired nearly $22 billion in insurance coverage on a total of $730 billion of single-family loans, according to Fannie Mae’s deal announcements.