Fannie Mae Prices Latest Credit Risk Sharing Transaction

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Fannie Mae has priced what it expects will be its final fixed severity deal, the government-sponsored enterprise said July 16.

Fannie Mae has planned a $1.56 billion note offering through its Connecticut Avenue Securities Series, which is scheduled to settle July 22. The Series 2015-C03 transaction references a pool of 225,000 single-family mortgage loans with an outstanding principal balance of roughly $48.3 billion.

The loans referenced in this eighth offering through the CAS series were acquired May through August, featuring strong credit standards and enhanced risk controls. The loans generally are fixed-rate, 30-year fully amortizing mortgages. The pool is split into two groups based on original loan-to-value ratios, with one including loans with original LTV ratios between 60.01% and 80% and the other featuring loans with ratios between 80.01% and 97%.

Fannie Mae said in a news release announcing the transaction that new and existing investors participated. As for pricing, both the 1M-1 and the 1M-2 tranches were valued at one-month Libor plus a spread of 150 basis points, while the 2M-1 and 2M-2 tranches were priced at one-month Libor plus a spread of 500 basis points.

Since beginning in 2013, the CAS program has issued $10 billion in notes and transferred the credit risk to private investors for loans with an outstanding unpaid principal balance of more than $390 billion.

“Despite various factors causing uncertainty in many global markets, we brought another successful CAS deal to the market and attracted new investors to the program,”said Laurel Davis, vice president for credit risk transfer at Fannie Mae. “Our strategy has been to come to market once a quarter with regular, consistent transactions that investors can plan for and we continued to demonstrate that philosophy with this deal.”

The GSE said in the news release that it plans to come out with its first actual loss deal as early as the fourth quarter of 2015, pending market conditions. Fannie Mae said it will release an enhanced single-family loan performance dataset ahead of the actual loss deal to provide credit performance information.

Fannie Mae has hinted at plans for an actual loss deal as early as Mayof this year. Freddie Mac, meanwhile, has already offered securities with exposure to actual losses: In April, it completed an actual loss transaction worth $1.01 billion that was upsized to appease strong demand.


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