Fannie Mae issues final credit insurance risk transfer of 2023

Fannie Mae announced its ninth and final credit insurance risk transfer of 2023, finishing with fewer transactions and a lower amount of unpaid balance in covered pools compared to last year.

The latest transaction, CIRT 2023-9, transfers $270.7 million worth of credit risk to 21 insurers in the private market. The loan pool comprises approximately 34,000 single-family mortgages with unpaid principal balances near $11.5 billion that were acquired between October-December 2022. Loan-to-value ratio within the pool runs between 80% and 97%.   

Fannie Mae will hold the risk of up to 165 basis points of loss in the pool, not to exceed the $190 million retention layer. The 21 reinsurers will cover the next 235 basis points to the maximum $270.7 million. 

Coverage is provided based upon actual losses for a term of 12.5 years. The coverage amount may be reduced on the one-year anniversary of the deal and each month thereafter depending on the extent loans in CIRT 2023-9 are paid down or become seriously delinquent. The government-sponsored enterprise may also end coverage after five years upon payment of a cancellation fee. 

For the year, Fannie Mae transferred $3.66 billion of risk in nine deals off $121 billion in single-family loans, two fewer than the amount issued in 2022. The value of unpaid balances associated with the transactions this year was also more than 77% below 2022's $535 billion.   

"As the market continues to adjust to evolving macroeconomic conditions, the engagement from our reinsurer partners has been instrumental to close out another successful year," said Devang Doshi, Fannie Mae senior vice president, capital markets.

To date, Fannie Mae has acquired approximately $25.9 billion of insurance coverage on $870.2 billion worth of loans through the CIRT program. At the end of the third quarter, $1.27 trillion in outstanding unpaid principal balance of single-family loans in Fannie Mae's books were included in a reference pool for credit-risk transfer transactions.

While loan performance has remained strong following expiration of pandemic relief measures, emerging signs of distress have raised some concerns. At a recent conference, the Mortgage Bankers Association said it expected delinquencies to increase in coming months. Compounding concerns are recent economic reports showing American households are encountering financial difficulties to a degree not seen in years. 

In a separate transaction this week, Fannie Mae this week also priced its first multifamily Connecticut Avenue Securities credit risk transfer of 2023 and third overall with a $595 million note offering. MCAS Series 2023-01 consists of 432 multifamily loans with an outstanding unpaid principal balance of approximately $24 billion. Loans were acquired between January 2021 and December 2022.