The premier credit risk transfer program for the reinsurance market
Credit Insurance Risk Transfer™, or CIRT™ deals, transfer credit risk on a pool of loans to an insurance provider which may then transfer that risk to one or more reinsurers. The reinsurance market is a significant and attractive source of private capital because reinsurers generally have diversified books of business that are not heavily concentrated in nor highly correlated to U.S. residential mortgage risk.
Insurance benefits paid under these transactions are based on actual losses, for which credit risk investors have expressed a preference. Additionally, these transactions complement Fannie Mae's other current risk sharing offerings that leverage the capital markets, mortgage insurance, or lender risk-sharing structures.
Fannie Mae offers both post-acquistion as well as front-end CIRT transactions. Post acquistion CIRT transactions transfer a portion of the credit risk on loans Fannie Mae has already acquired while front end CIRT transactions commit coverage for loans to be acquired over a forward delivery period. Coverage for front end transactions begins as soon as those loans are acquired by Fannie Mae, eliminating aggregation risk.
CIRT is designed to be flexible and can cover various loan types acquired by Fannie Mae. While most CIRT transactions cover collateral pools similar to those covered by CAS (30-year fixed-rate), pools of adjustable-rate mortgages and 15/20 year fixed rate mortgages have been covered on a periodic basis.
A transparent program
Key deal documents and transaction data are available on our webpages.
- At-issuance data and monthly performance data are available on our Transactions and Servicing Reports page.
- Unique program features include transparent pricing for all CIRT transactions to-date on our Transactions page and aggregate CIRT deal data access through our innovative analytics tool, Data Dynamics.
A simple loss structure
The loss coverage on CIRT transactions is structured similarly to Fannie Mae’s CAS transactions for institutional investors:
- Fannie Mae retains an initial portion of risk (typically the first 50 basis points of loss) thus aligning our interests with credit risk investors.
- If this retention level is exhausted, reinsurers cover actual losses up to a detachment point (typically the next 250 basis points of losses)
- Actual losses are paid after property disposition
- Beginning with CIRT deals executed in 2017, step-down may occur on first and subsequent anniversaries depending upon the level of pool delinquencies and pool paydowns
- 10-year term. Fannie Mae may terminate coverage on/after the fifth anniversary upon payment of an early termination fee
- Fannie Mae may also terminate coverage once the covered pool balance <10% initial pool balance
- Partial collateralization of risk exposure, based upon reinsurer’s external ratings
- Reinsurers benefit from Fannie Mae's robust and transparent credit risk management processes.
Geographically diverse reference pools
- Reference pools include recently acquired loans
- Large and highly diversified reference pools, offering broad exposure to the US housing market
- Comprised of loans that meet Fannie Mae’s rigorous underwriting and eligibility criteria
- Fannie Mae's innovative quality control process applies to all loans included in each reference pool – Fannie Mae provides ongoing credit risk management oversight throughout the life of each loan
Are you a reinsurer who wants to learn more about our CIRT program? We would love to meet with you. Contact us here.