US MBS packager Fannie Mae cuts Q3 insurance limit
Fannie Mae, the US government-backed firm that packages mortgage-backed securities, bought a mere $344 million in excess of loss limit on only $8.4 billion in underlying housing portfolios during the third quarter, well down from prior periods amid tighter reinsurance terms.
The Q3 sum on credit insurance risk transfer (CIRT) transactions came on a single deal during the quarter, down from three deals in Q2 for $1.2 billion in limit and two deals in Q3 2022 for $965 million in limit.
Despite the decline on prior periods, 2023 to date still shows higher risk transfer than any year over the past decade save for the massive spike in limit purchases in 2022.
As on the broader re/insurance market, Fannie Mae has had to give ground on retentions. The Q3 2023 retentions have doubled as a portion of limit versus the prior year period and are up 2.7x year on year in the 9M YTD.
Credit insurance risk transfer transactions transfer credit risk on a pool of loans to an insurance provider, which may then transfer that risk to one or more reinsurers, complementing Fannie Mae's fuller palette of market-based risk transfer offerings.
Fannie Mae has said it anticipates acquiring approximately $3-4.5 billion of CIRT coverage in 2023. After nine months, the purchase limit came to $2.985 billion.
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