Fannie Mae, a government-sponsored enterprise (GSE), has announced that 26 re/insurers are supporting its seventh Credit Insurance Risk Transfer transaction of the year, CIRT 2024-L4, which effectively transferred $338.6 million in mortgage credit risk.
This transaction allows for faster release of coverage under updated terms if the covered loan pool performs well.
Additionally, the insurance premium obligation is now linked to the remaining coverage amount rather than the outstanding balance of the loan pool.
“We appreciate the support of the 26 insurers and reinsurers that committed to write coverage on this deal, including the strong reception to the new structural enhancements that we introduced in the updated CIRT insurance policy,” commented Rob Schaefer, Fannie Mae Vice President, Capital Markets
The CIRT 2024-L4 pool comprises approximately 23,500 single-family mortgage loans with an unpaid principal balance (UPB) of around $7.9 billion.
The loans, acquired between September and December 2023, feature loan-to-value (LTV) ratios between 60.01% and 80.00%. These fixed-rate mortgages generally have a 30-year term and were underwritten with strict credit standards and robust risk management controls.
Effective September 1, 2024, Fannie Mae will retain the first 170 basis points of loss on this $7.9 billion loan pool. Should the $133.9 million retention layer be exhausted, the 26 supporting insurers and reinsurers will cover the next 430 basis points of loss, up to a total of $338.6 million.
The coverage for this agreement is determined by actual losses over an 18-year term. The coverage amount can be modified monthly following the policy’s effective date, based on the principal amounts of insured loans that become significantly overdue and the reduction of the insured pool. Fannie Mae can terminate the coverage after five years by paying a cancellation fee.
Since the launch of the CIRT programme, Fannie Mae has obtained about $28.1 billion in insurance coverage for $935 billion in single-family loans, as assessed at the time of issuance for both bulk and front-end transactions.
As of June 30, 2024, approximately $1.35 trillion in outstanding unpaid principal balance (UPB) of loans within its single-family conventional guaranty book were included in a reference pool for credit risk transfer transactions.
To enhance transparency and aid insurers and reinsurers in assessing the CIRT program, Fannie Mae offers comprehensive disclosure data, along with access to news, resources, and analytics via its credit risk transfer webpages.
This includes Fannie Mae’s Data Dynamics® tool, which allows market participants to examine both current CIRT transactions and historical loan data.
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