Fannie Mae Executes Two Credit Insurance Risk Transfer Transactions on $26.6 Billion of Single-Family Loans
WASHINGTON, DC – Fannie Mae (FNMA/OTC) announced today that it has executed its sixth and seventh Credit Insurance Risk Transfer™ (CIRT™) transactions of 2023. CIRT 2023-6 and CIRT 2023-7 in aggregate transferred $789 million of mortgage credit risk to private insurers and reinsurers. These transactions were brokered by Aon plc, a leading global professional services firm, and sub-brokered by certified minority business enterprise (MBE) Protecdiv.
"We appreciate the continued support of the 21 insurers and reinsurers that have committed to write coverage for these deals," said Rob Schaefer, Fannie Mae Vice President, Capital Markets. "We're also pleased to continue our long-standing partnership with Aon and begin a new partnership with their new sub-broker, Protecdiv, a company focused on bringing exceptional service and diverse ideas to its clients and partners. We hope their participation will help draw more diverse-led firms into this space."
The covered loan pool for CIRT 2023-6 consists of approximately 30,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $9.65 billion. The covered pool includes collateral with loan-to-value (LTV) ratios of 60.01 percent to 80.00 percent acquired between April 2022 and August 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.
The covered loan pool for CIRT 2023-7 consists of approximately 51,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $16.9 billion. The covered pool includes collateral with loan-to-value (LTV) ratios of 80.01 percent to 97.00 percent acquired between July 2022 and September 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.
"Aon has proudly served Fannie Mae since 2014, supporting the development and brokering of their innovative mortgage credit risk transfer transactions with reinsurers" said Joe Monaghan, Global Growth Leader for Aon's Reinsurance Solutions and Chief Executive Officer of Aon's Public Sector Partnership. "We are delighted to collaborate with Protecdiv as we continue to deliver on a shared commitment to greater equity, inclusion, and impact."
"We are delighted that our work supports Fannie Mae's mission to improve diversity in housing finance and look forward to working with them to support the company's efforts in the future," said Kael Coleman, Protecdiv Founder and Chief Executive Officer. "Protecdiv's mission is to improve society through insurance, and we are accomplishing this through the fulfillment of the risk transfer and the supplier diversity goals of large U.S. businesses and public entities."
With CIRT 2023-6, which became effective May 1, 2023, Fannie Mae will retain risk for the first 130 basis points of loss on the $9.65 billion covered loan pool. If the $125 million retention layer is exhausted, 20 reinsurers will cover the next 405 basis points of loss on the pool, up to a maximum coverage of $391 million.
With CIRT 2023-7, which became effective May 1, 2023, Fannie Mae will retain risk for the first 155 basis points of loss on the $16.9 billion covered loan pool. If the $262 million retention layer is exhausted, 20 reinsurers will cover the next 235 basis points of loss on the pool, up to a maximum coverage of $398 million.
Coverage for these deals 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 these deals 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 $25.2 billion of insurance coverage on $850 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 31, 2023, approximately $1.17 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.
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