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Press Release

Fannie Mae Prices $1 Billion Connecticut Avenue Securities (CAS) REMIC Deal

June 25, 2019

Transaction Represents Company’s Continued Commitment to Credit Risk Transfer

Matthew Classick

WASHINGTON, DC – Fannie Mae (FNMA/OTCQB) priced its fourth credit risk transfer transaction of the year, Connecticut Avenue Securities® (CAS) Series 2019-R04, a $1 billion note offering that represents Fannie Mae's latest CAS REMIC transaction. CAS is Fannie Mae's benchmark issuance program designed to share credit risk on its single-family conventional guaranty book of business.

"Our latest deal was met with strong investor demand across all classes, including several new participants," said Laurel Davis, Vice President of Credit Risk Transfer, Fannie Mae. "We look forward to returning to the market next month with CAS 2019-R05, a low-LTV loan transaction."

The reference pool for CAS Series 2019-R04 consists of nearly 103,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $25 billion. The reference pool includes one group of loans comprised of collateral with loan-to-value ratios of 80.01 percent to 97.00 percent acquired from May 2018 through December 2018. The loans included in this transaction are fixed-rate, generally 30-year term, fully amortizing mortgages and were underwritten using rigorous credit standards and enhanced risk controls.

Fannie Mae will retain a portion of the 2M-1, 2M-2, and 2B-1 tranches in order to align its interests with investors throughout the life of the deal. Fannie Mae will retain the full 2B-2H first loss tranche.

Class Offered Amount ($MM) Pricing Level Expected Rating (Fitch/Morningstar)
2M-1 $234.277 1-month Libor plus 75 bps BBB-sf / BBB+
2M-2 $538.836 1-month Libor plus 210 bps Bsf / BB
2B-1 $257.704 1-month Libor plus 525 bps This class will not be rated

Bank of America Merrill Lynch ("BofA Merrill Lynch") is the lead structuring manager and joint bookrunner and Nomura Securities International, Inc. ("Nomura") is the co-lead manager and joint bookrunner. Co-managers J.P. Morgan Securities LLC ("J.P. Morgan"), BNP Paribas Securities Corp. ("BNP"), Morgan Stanley & Co. LLC ("Morgan Stanley"), and Barclays Capital Inc. ("Barclays"). Selling group members are Great Pacific Securities and Siebert Cisneros Shank & Co., L.L.C.

Fannie Mae's CAS program continues to lead in new issuance and is the most actively traded credit risk transfer product in the market. The CAS REMIC recently received four awards in the 17th Annual American Business Awards®. This included the People's Choice Award for Favorite New Product (B2B product), as well as three Bronze Awards in the following categories:

  • Business-to-Business Products: CAS REMIC
  • Product Management Department/Team of the Year: CAS Working Party
  • Product Developer of the Year: Dennis Crosson, Director of Credit Risk Transfer, Fannie Mae 

With the completion of this transaction, Fannie Mae will have brought 34 CAS deals to market, issued $40 billion in notes, and transferred a portion of the credit risk to private investors on more than $1.2 trillion in single-family mortgage loans, measured at the time of the transaction. Since 2013, Fannie Mae has transferred a portion of the credit risk on $1.8 trillion in single-family mortgages, measured at the time of the transaction, through all of its credit risk transfer programs. In 2018, Fannie Mae introduced the CAS REMIC, which helps to expand the CAS investor base and further enhance the long-term liquidity of the program.

Fannie Mae's deliberate issuer strategy works to build the CAS program in a sustainable way to promote liquidity and to build a broad and diverse investor base. To promote transparency and to help investors evaluate our program, Fannie Mae provides ongoing, robust disclosure data to help credit investors evaluate the program, as well as access to news, resources, and analytics through its credit risk transfer webpages. This includes Fannie Mae's innovative Data Dynamics® tool and EU Resources page, which enables market participants to analyze CAS deals that are currently outstanding.

In addition to our flagship CAS program, Fannie Mae continues to reduce risk to taxpayers through its Credit Insurance Risk Transfer (CIRT) reinsurance program and other forms of risk transfer.

About Connecticut Avenue Securities
CAS REMIC notes are issued by a bankruptcy-remote trust. The amount of periodic principal and ultimate principal paid by Fannie Mae is determined by the performance of a large and diverse reference pool. For more information on individual CAS transactions, visit our credit risk transfer website.

Statements in this release regarding the company's future CAS transactions are forward-looking. Actual results may be materially different as a result of market conditions or other factors listed in "Risk Factors" or "Forward-Looking Statements" in the company's annual report on Form 10-K for the year ended December 31, 2018. This release does not constitute an offer or sale of any security. Before investing in any Fannie Mae issued security, potential investors should review the disclosure for such security and consult their own investment advisors.


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