Fannie Mae Prices Latest Connecticut Avenue Securities Risk Sharing Deal

Pete Bakel

202-752-2034

WASHINGTON, DC – Fannie Mae (FNMA/OTC) has priced its latest credit risk sharing transaction under its Connecticut Avenue Securities^™ (CAS) program. CAS Series 2016-C07, a $701.7 million note offering, is scheduled to settle on December 8, 2016.

Through this transaction and other credit risk sharing programs, the company is increasing the role of private capital in the mortgage market and reducing taxpayer risk. After this transaction is completed, Fannie Mae will have brought 16 CAS deals to market since the program began, issued $19.8 billion in notes, and transferred a portion of the credit risk to private investors on single-family mortgage loans with an original unpaid principal balance of approximately $677 billion. Since 2013, Fannie Mae has transferred a portion of the credit risk on approximately $834 billion in single-family mortgages through all of its risk transfer programs.

“We are pleased to successfully bring our seventh and final transaction of the year to market. Throughout 2016, we continued to drive innovation in credit risk management, increase transparency of our data and tools, and deliver consistent CAS offerings that were met with robust and growing investor demand,” said Laurel Davis, vice president of credit risk transfer, Fannie Mae. “We look forward to continued CAS transactions in 2017 and we expect to be in the market within our next scheduled issuance window in January, subject to market conditions.”

The reference pool for CAS Series 2016-C07 consists of more than 96,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $22.5 billion. The loans in this reference pool have loan-to-value ratios between 80 and 97 percent and were acquired from January 2016 through April 2016. The reference pool loans in this deal were acquired with mortgage insurance meeting Fannie Mae requirements. The loans included in this transaction are fixed-rate, generally 30-year term, fully amortizing mortgages and were underwritten using strong credit standards and enhanced risk controls. Pricing for the 2M-1 tranche was one-month LIBOR plus a spread of 130 basis points. Pricing for the 2M-2 tranche was one-month LIBOR plus a spread of 435 basis points. Pricing for the 2B tranche was one-month LIBOR plus a spread of 950 basis points.

The 2M-1 tranche is expected to receive ratings of BBB-(sf) from Fitch and BBB(sf) from KBRA, Inc. The 2M-2 tranche is expected to receive ratings of B(sf) from Fitch as and B+(sf) from KBRA, Inc. The 2B tranche will not be rated.

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

Barclays Capital Inc. is the lead structuring manager and joint bookrunner and Citigroup Global Markets Inc. is the co-lead manager and joint bookrunner. Co-managers are J.P. Morgan Securities LLC, Bank of America Merrill Lynch, and Wells Fargo Securities LLC. Selling group members are Drexel Hamilton LLC and Mischler Financial Group Inc.

Fannie Mae continues to provide ongoing robust disclosure data for credit investors, and to provide additional transparency, has greatly enhanced its credit risk sharing webpages to provide investors with further access to news, resources, and analytics. This included the launch of Fannie Mae’s Data Dynamics^™ tool, which enables market participants to analyze CAS deals that are currently outstanding in the market as well as Fannie Mae’s comprehensive historical loan dataset of over 23 million loans.

In addition to the 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 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. For more information on individual CAS transactions and Fannie Mae’s approach to credit risk transfer, visit https://www.fanniemae.com/portal/funding-the-market/credit-risk/index.html. To view the periods in 2017 during which Fannie Mae may issue Connecticut Avenue Securities (CAS), please view our 2017 CAS Issuance Calendar.

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, 2015 and its quarterly report on Form 10-Q for the quarter ended September 30, 2016. 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.