In a strategic move to manage mortgage risk, the Federal National Mortgage Association (Fannie Mae) has finalized its fourth Credit Insurance Risk Transfer (CIRT) transaction for 2024, shifting $284.8 million in mortgage credit risk to private insurers and reinsurers.
This latest transaction, designated as CIRT 2024-H2, was made effective on April 1, 2024. Fannie Mae reported that 25 insurers and reinsurers are involved in providing coverage for this deal. The covered loan pool consists of around 34,000 single-family mortgage loans, holding an unpaid principal balance of approximately $12.1 billion.
The loans in this pool, acquired between May 2023 and September 2023, feature loan-to-value (LTV) ratios from 80.01% to 97.00%. These are fixed-rate, mainly 30-year term, fully amortizing mortgages, underwritten with robust credit standards and advanced risk controls.
Under the terms of CIRT 2024-H2, Fannie Mae will cover the initial 185 basis points of loss on the $12.1 billion loan pool. If this $224.2 million retention layer is depleted, the participating insurers and reinsurers will take on the next 235 basis points of loss, up to a maximum of $284.8 million.
"Coverage for this deal is provided based upon actual losses for a term of 18 years," Fannie Mae stated. "The coverage amount may be reduced at the one-year anniversary and each month thereafter, depending on the paydown of the insured pool and the principal amounts of insured loans that become seriously delinquent."
Fannie Mae also retains the option to cancel the coverage anytime on or after the five-year anniversary of the effective date, subject to a cancellation fee.
Since the inception of the CIRT program, Fannie Mae has secured about $27.2 billion of insurance coverage on $913.4 billion in single-family loans. Previous transactions in 2024, including CIRT 2024-L2 and CIRT 2024-H1, have successfully transferred $709 million of mortgage credit risk to private insurers and reinsurers.
This latest transaction underscores Fannie Mae’s dedication to reducing its risk exposure and reinforcing the stability of the housing market.