Fannie Mae has executed its first Credit Insurance Risk Transfer (CIRT) transaction of 2024, CIRT 2024-L1 which transferred $355.6 million of mortgage credit risk to private insurers and reinsurers.
“CIRT 2024-L1 begins another active year of CIRT issuance for Fannie Mae,” said Rob Schaefer, Fannie Mae’s VP of Capital Markets. “We appreciate the support of the 24 insurers and reinsurers that committed to write coverage and supported the extension of the CIRT maturity term on this deal to 18 years, from the 12.5-year term that had been utilized for most CIRT deals executed since 2019.”
As of Q3 2023, $865 billion of unpaid principal balance of single-family mortgage loans has been partially covered through CIRT transactions, measured at the time of the transactions.
The covered loan pool for CIRT 2024-L1 consists of approximately 28,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $9 billion. The covered pool includes collateral with loan-to-value (LTV) ratios of 60.01% to 80% acquired between January 2023 and April 2023. The loans included in this transaction are fixed-rate, generally 30-year term, fully amortizing mortgages.
Analyzing Fannie Mae’s CIRT
According to Fannie Mae and beginning with this transaction, CIRT deals that cover existing pools of low-LTV loans will be identified by prefacing the CIRT deal number with the letter ‘L,’ and CIRT deals that cover existing pools of high-LTV loans will be identified by prefacing the CIRT deal number with the letter ‘H.’
With CIRT 2024-L1, which became effective January 1, 2024, Fannie Mae will retain risk for the first 150 basis points of loss on the $9 billion covered loan pool. If the $135.1 million retention layer is exhausted, 24 reinsurers will cover the next 395 basis points of loss on the pool, up to a maximum coverage of $355.6 million.
Coverage of CIRT 2024-L1 is provided based upon actual losses for a term of 18 years. Depending on 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. 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.
History of the CIRT program
Since inception to date, Fannie Mae has acquired approximately $26.2 billion of insurance coverage on $879.2 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 December 31, 2023, approximately $1.29 trillion in outstanding unpaid principal balance of loans in our single-family conventional guaranty book of business were included in a reference pool for a credit risk transfer transaction.
Fannie Mae’s CIRT is designed to be flexible, offering both post-acquisition and front-end CIRT transactions, while covering various loan types acquired by the GSE. Reinsurers generally have diversified books of business that are not heavily concentrated in or highly correlated to U.S. residential mortgage risk, making the reinsurance market a significant and attractive source of private capital.
As one of the nation’s largest managers of residential mortgage credit, Fannie Mae has established a standard for managing credit risk throughout the life cycle of a mortgage–continuously innovating to reduce default risk and credit losses.
