Fannie Mae Prices First Capital Markets Risk Sharing Transaction of 2015
WASHINGTON, DC – Fannie Mae (FNMA/OTC) today announced that it priced its first credit risk sharing transaction of 2015 under its Connecticut Avenue Securities (CAS) series. The $1.47 billion note offering priced today and is scheduled to settle on February 26. This deal (Series 2015-C01) is consistent with prior transactions, and includes reference loans with original loan-to-value ratios (LTV) of up to 97 percent.
“We are pleased to come to market again with large, highly diversified loan pools that give investors exposure to the national housing market. Investors have continued to express interest in these opportunities and we believe our programmatic issuance and the consistency of the structures helps to promote liquidity,” said Laurel Davis, vice president for credit risk transfer at Fannie Mae. “In 2014 we issued four CAS transactions totaling $5.85 billion in note issuance and covering $222 billion in loan UPB. For 2015, we expect to continue similar ongoing quarterly issuance, subject to market conditions. We continue to work to expand the investor base in the program and were pleased to see a significant number of new investors participate in this deal.”
CAS notes are bonds issued by Fannie Mae. The amount of periodic principal and ultimate principal paid by Fannie Mae is determined by the performance of a large and diverse reference pool. The reference pool for the Series 2015-C01transaction contains over 234,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $50.2 billion. This reference pool consists of eligible loans acquired from September through November of 2013, part of Fannie Mae’s new book of business underwritten using strong credit standards and enhanced risk controls. The loans included in this transaction are fixed-rate, generally 30-year term, fully amortizing mortgages and the reference pool is subdivided into two loan groups by original LTV. Group one includes loans with original LTV ratios between 60.01 percent and 80.00 percent. Group two includes loans with original LTV ratios between 80.01 percent and 97.00 percent.
Pricing for the 1M-1 tranche was one-month LIBOR plus a spread of 150 basis points. Pricing for the 1M-2 tranche was one-month LIBOR plus a spread of 430 basis points. Pricing for the 2M-1 tranche was one-month LIBOR plus a spread of 150 basis points. Pricing for the 2M-2 tranche was one-month LIBOR plus a spread of 455 basis points. The transaction included participation from a broadly diversified group of both new and existing investors.
The 1M-1 tranche is expected to receive ratings of BBB-sf by Fitch Ratings and BBB (low) (sf) by DBRS, Inc. The 2M-1 tranche is expected to receive ratings of BBBsf by Fitch Ratings and BBB (low) (sf) by DBRS, Inc. The 1M-2 tranche and 2M-2 tranche were not rated. Fannie Mae retained the first loss and senior piece of the structure, as well as a vertical slice of the M1 and M2 tranches in both groups in order to align its interests with investors throughout the life of the deal.
Bank of America Merrill Lynch was the lead structuring manager and joint bookrunner and JP Morgan Securities, LLC was the co-lead manager and joint bookrunner on this transaction. Barclays Capital, Inc., Citigroup Inc., Morgan Stanley and Nomura Securities International, Inc. were co-managers, and CastleOak Securities, L.P. participated as a selling group member.
For more information on this transaction and Fannie Mae’s approach to credit risk transfer, visit https://www.fanniemae.com/portal/funding-the-market/credit-risk/index.htmlFannie Mae enables people to buy, refinance, or rent homes.
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