Fannie Mae Executes its Fourth Credit Insurance Risk Transfer Transaction of 2024 on $12.1 Billion of Single-Family Loans

Rhea-AI Summary

Fannie Mae (FNMA) has completed its fourth Credit Insurance Risk Transfer (CIRT) transaction of 2024, known as CIRT 2024-H2, transferring $284.8 million of mortgage credit risk to private insurers and reinsurers. The covered loan pool includes approximately 34,000 single-family mortgage loans with an unpaid principal balance (UPB) of $12.1 billion, featuring loan-to-value (LTV) ratios between 80.01% and 97%. These loans were acquired between May and September 2023 and are fixed-rate, 30-year term, fully amortizing mortgages underwritten with stringent credit standards.

The transaction, effective April 1, 2024, retains risk for the first 185 basis points of loss on the $12.1 billion loan pool. If this retention layer is exhausted, 25 insurers and reinsurers will cover the next 235 basis points of loss, up to $284.8 million. Coverage lasts for 18 years, with potential reductions based on loan paydowns and delinquencies. Fannie Mae may cancel coverage after five years by paying a fee. To date, Fannie Mae has acquired $27.2 billion in insurance coverage on $913.4 billion of single-family loans through the CIRT program.

Positive

• Fannie Mae transferred $284.8 million of mortgage credit risk, reducing its exposure.
• The transaction includes approximately 34,000 single-family loans with a $12.1 billion UPB.
• Fannie Mae retains risk for the first 185 basis points, reducing potential losses.
• Coverage is provided for 18 years, enhancing long-term financial stability.
• The CIRT program has acquired $27.2 billion in insurance coverage to date, demonstrating its scale and effectiveness.
• Fannie Mae's stringent credit standards and enhanced risk controls support loan quality.

Negative

• Coverage amount may reduce based on loan paydowns and serious delinquencies, limiting risk protection.
• Fannie Mae retains initial risk for the first 185 basis points, exposing it to potential initial losses.
• Cancellation of coverage after five years may incur additional fees, impacting financials.

WASHINGTON, June 11, 2024 /PRNewswire/ -- Fannie Mae (FNMA/OTC) announced today that it has executed a new Credit Insurance Risk Transfer™ (CIRT™) transaction. CIRT 2024-H2 transferred $284.8 million of mortgage credit risk to private insurers and reinsurers.

"We appreciate the support of the 25 insurers and reinsurers that committed to write coverage on this deal," said Rob Schaefer, Fannie Mae Vice President, Capital Markets.

The covered loan pool for CIRT 2024-H2 consists of approximately 34,000 single-family mortgage loans with an outstanding unpaid principal balance (UPB) of approximately $12.1 billion. Additionally, the covered pool collateral has loan-to-value (LTV) ratios of 80.01 percent to 97.00 percent and was acquired between May 2023 and September 2023. 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 2024-H2, which became effective April 1, 2024, Fannie Mae will retain risk for the first 185 basis points of loss on the $12.1 billion covered loan pool. If the $224.2 million retention layer is exhausted, 25 insurers and reinsurers will cover the next 235 basis points of loss on the pool, up to a maximum coverage of $284.8 million.

Coverage for this deal is provided based upon actual losses for a term of 18 years. Depending on the paydown of the insured pool and the principal amounts of insured loans that become seriously delinquent, the 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.

Since inception to date, Fannie Mae has acquired approximately $27.2 billion of insurance coverage on $913.4 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 March 30, 2024, approximately $1.33 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 specific 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: fanniemae.com | Twitter | Facebook | LinkedIn | Instagram | YouTube | Blog

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SOURCE Fannie Mae

FAQ

What is Fannie Mae's CIRT 2024-H2 transaction?

CIRT 2024-H2 is Fannie Mae's fourth Credit Insurance Risk Transfer transaction of 2024, transferring $284.8 million of mortgage credit risk to private insurers and reinsurers.

How much mortgage credit risk did Fannie Mae transfer in CIRT 2024-H2?

Fannie Mae transferred $284.8 million of mortgage credit risk in the CIRT 2024-H2 transaction.

What is the outstanding unpaid principal balance of the loans in CIRT 2024-H2?

The outstanding unpaid principal balance in the CIRT 2024-H2 transaction is $12.1 billion.

When was Fannie Mae's CIRT 2024-H2 transaction effective?

The CIRT 2024-H2 transaction was effective on April 1, 2024.

How long is the coverage period for CIRT 2024-H2?

The coverage period for CIRT 2024-H2 is 18 years.

What is the loan-to-value (LTV) ratio range for the covered loan pool in CIRT 2024-H2?

The loan-to-value ratios for the covered loan pool in CIRT 2024-H2 range from 80.01% to 97%.

How many insurers and reinsurers are involved in CIRT 2024-H2?

Twenty-five insurers and reinsurers are involved in the CIRT 2024-H2 transaction.

Under what conditions can Fannie Mae cancel the CIRT 2024-H2 coverage?

Fannie Mae can cancel the CIRT 2024-H2 coverage at any time after the five-year anniversary of the effective date by paying a cancellation fee.