Fannie Mae Prices $1 Billion Connecticut Avenue Securities (CAS) REMIC Deal
WASHINGTON, DC – Fannie Mae (FNMA/OTCQB) priced its second credit risk transfer transaction of the year, Connecticut Avenue Securities® (CAS) Series 2019-R02, a $1 billion note offering that represents Fannie Mae's third 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.
"We were delighted to see that our second transaction of the year was met with high demand from a deep base of investors, including several first-time participants. Since the beginning of the year, we have seen a substantial number of new investors participate in the CAS program," said Laurel Davis, vice president of credit risk transfer, Fannie Mae. "We expect to return to the market with our next deal, CAS 2019-R03, another low-LTV transaction, at the end of March."
The reference pool for CAS Series 2019-R02 consists of more than 107,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $27 billion. The reference pool will include one group of loans comprised of collateral with loan-to-value ratios of 60.01 percent to 80.00 percent acquired from May through September 2018. The loans included in this transaction are fixed-rate, generally 30-year term, fully amortizing mortgages and were underwritten using rigorous credit standards and enhanced risk controls.
Fannie Mae will retain a portion of the 1M-1, 1M-2, and 1B-1 tranches in order to align its interests with investors throughout the life of the deal. Fannie Mae will retain the full 1B-2H tranche.
|Offered Amount ($MM)
|Expected Rating (S&P/Morningstar)
|1-month Libor plus 85 bps
|BBB+ sf / A
|1-month Libor plus 230 bps
|B+ sf / BBB-
|1-month Libor plus 415 bps
|This class will not be rated
Nomura Securities International ("Nomura") is the lead structuring manager and joint bookrunner and Wells Fargo Securities, LLC ("Wells Fargo Securities") is the co-lead manager and joint bookrunner. Co-managers are Bank of America Merrill Lynch ("BofA Merrill Lynch"), BNP Paribas Securities Corp. ("BNP"), Morgan Stanley & Co. LLC ("Morgan Stanley"), and Citigroup Global Markets Inc. ("Citigroup"). Selling group members are Drexel Hamilton, LLC and Siebert Cisneros Shank & Co., L.L.C.
Fannie Mae's CAS program continues to lead the market in new issuance and is the most actively traded credit risk transfer product in the market. With the completion of this transaction, Fannie Mae will have brought 32 CAS deals to market since the program began, issued $38 billion in notes, and transferred a portion of the credit risk to private investors on over $1.2 trillion in single-family mortgage loans as part of the CAS program. Since 2013, Fannie Mae has transferred a portion of the credit risk on approximately $1.6 trillion in single-family mortgages through all of its 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 sharing webpages. This includes Fannie Mae's innovative Data Dynamics® tool, 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 and Fannie Mae's approach to credit risk transfer, visit our credit risk sharing website.
Fannie Mae helps make the 30-year fixed-rate mortgage and affordable rental housing possible for millions of Americans. We partner with lenders to create housing opportunities for families across the country. We are driving positive changes in housing finance to make the home buying process easier, while reducing costs and risk. To learn more, visit fanniemae.com and follow us on twitter.com/FannieMae.