Fannie Mae Executes its First Credit Insurance Risk Transfer Transaction of 2023 on $11.8 Billion of Single-Family Loans

Rhea-AI Summary

Fannie Mae (OTCQB: FNMA) executed its first Credit Insurance Risk Transfer™ (CIRT™) transaction of 2023, transferring $407.5 million of mortgage credit risk to private insurers. This transaction covers approximately 35,000 mortgage loans with an unpaid principal balance of $11.8 billion. Since the program's inception, Fannie Mae has secured about $22.6 billion in insurance coverage on $761 billion of single-family loans. Fannie Mae will retain risk for 75 basis points of loss, with reinsurers covering the next 345 basis points up to $407.5 million. The CIRT 2023-1 transaction aims to mitigate taxpayer risk by enhancing private capital's role in the mortgage market.

Positive

• Executed first CIRT transaction of 2023, transferring $407.5 million of mortgage credit risk.
• Increased private capital involvement in the mortgage market reduces taxpayer risk.
• Established partnerships with 22 insurers and reinsurers for backing the transaction.

Negative

• Retains risk for the first 75 basis points of loss from the $11.8 billion loan pool, which could indicate potential exposure.
• Coverage may be canceled after five years upon payment of a cancellation fee.

WASHINGTON, March 1, 2023 /PRNewswire/ -- Fannie Mae (OTCQB: FNMA) announced today that it has executed its first Credit Insurance Risk Transfer™ (CIRT™) transaction of 2023. As part of Fannie Mae's ongoing effort to reduce taxpayer risk by increasing the role of private capital in the mortgage market, CIRT 2023-1 transferred $407.5 million of mortgage credit risk to private insurers and reinsurers. Since inception to date, Fannie Mae has acquired approximately $22.6 billion of insurance coverage on $761 billion of single-family (SF) loans through the CIRT program, measured at the time of issuance for both post-acquisition (bulk) and front-end transactions.

"CIRT 2023-1 begins another active year of CIRT issuance for Fannie Mae. We appreciate our continued partnership with the 22 insurers and reinsurers who have committed to write coverage for this deal," said Rob Schaefer, Fannie Mae Vice President for Capital Markets.

The covered loan pool for CIRT 2023-1 consists of approximately 35,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $11.8 billion. The covered pool includes collateral with loan-to-value (LTV) ratios of 60.01 percent to 80.00 percent acquired in January 2022. The loans included in this transaction are fixed-rate, generally 30-year term, fully amortizing mortgages and were underwritten using rigorous credit standards and enhanced risk controls.

With CIRT 2023-1, which became effective January 1, 2023, Fannie Mae will retain risk for the first 75 basis points of loss on the $11.8 billion covered loan pool. If the $88.6 million retention layer is exhausted, 22 reinsurers will cover the next 345 basis points of loss on the pool, up to a maximum coverage of $407.5 million.

Coverage for this deal is provided based upon actual losses for a term of 12.5 years. Depending on the paydown of the insured pool and the principal amount of insured loans that become seriously delinquent, the aggregate coverage amount may be reduced at the one-year anniversary and each month thereafter. The coverage on this deal may be canceled by Fannie Mae at any time on or after the five-year anniversary of the effective date by paying a cancellation fee.

As of December 31, 2022, approximately $1.1 trillion in outstanding UPB of loans in our single-family conventional guaranty book of business were included in a reference pool for a credit risk transfer transaction.

To promote transparency and to help insurers and reinsurers evaluate the CIRT program, Fannie Mae provides ongoing, robust disclosure data, as well as access to news, resources, and analytics through its credit risk transfer webpages. This includes Fannie Mae's innovative Data Dynamics^® tool that enables market participants to interact with and analyze both CIRT deals that are currently outstanding in the market and Fannie Mae's historical loan dataset. For more information on individual CIRT transactions, including pricing, please visit our Credit Insurance Risk Transfer webpage.

About Fannie Mae
Fannie Mae advances equitable and sustainable access to homeownership and quality, affordable rental housing for millions of people across America. We enable the 30-year fixed-rate mortgage and drive responsible innovation to make homebuying and renting easier, fairer, and more accessible. To learn more, visit:
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SOURCE Fannie Mae

FAQ

What is Fannie Mae's first Credit Insurance Risk Transfer 2023 transaction about?

Fannie Mae's first CIRT transaction of 2023 involves transferring $407.5 million of mortgage credit risk on approximately 35,000 loans.

How much mortgage credit risk has Fannie Mae transferred since the inception of CIRT?

Since its inception, Fannie Mae has transferred approximately $22.6 billion in credit risk through the CIRT program.

What is the loan amount covered under CIRT 2023-1?

The CIRT 2023-1 transaction covers loans with an outstanding unpaid principal balance of about $11.8 billion.

How does Fannie Mae's CIRT program benefit taxpayers?

The CIRT program benefits taxpayers by transferring mortgage credit risk to private insurers, reducing the financial burden on taxpayers.

What is the role of reinsurers in Fannie Mae's CIRT 2023-1?

In CIRT 2023-1, 22 reinsurers will cover the next 345 basis points of loss after Fannie Mae's retention layer is exhausted.