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Press Release

Fannie Mae Prices Latest Connecticut Avenue Securities Risk Sharing Deal

July 19, 2016


Pete Bakel


WASHINGTON, DC – Fannie Mae (FNMA/OTC) has priced its latest credit risk sharing transaction under its Connecticut Avenue Securities (CAS) series, a $1.32 billion note offering scheduled to settle on Thursday, July 28. 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 13 CAS deals to market since the program began, issued $16.9 billion in notes, and transferred a portion of the credit risk to private investors on single-family mortgage loans with an outstanding unpaid principal balance of approximately $580 billion. Since 2013, Fannie Mae has transferred a portion of the credit risk on approximately $700 billion in single-family mortgages through all of its risk transfer programs.

“Demand for CAS bonds remains strong and investors continue to show interest in the strength of the U.S. housing market. Our credit risk transfer securities have performed well and we continue to see active trading in secondary markets, despite recent market uncertainties due to Brexit,” said Laurel Davis, vice president of credit risk transfer, Fannie Mae. “The loans in the reference pool for this CAS deal have loan-to-value ratios between 60 and 80 percent. We plan to come to market again in early August with our next transaction – CAS 2016-C05, backed by loans with LTV’s above 80 percent, which carry primary mortgage insurance. After the August transaction, our next scheduled deal issuance window is in late October, per our published deal issuance calendar.”

Pricing for the 1M-1 tranche was one-month LIBOR plus a spread of 145 basis points. Pricing for the 1M-2 tranche was one-month LIBOR plus a spread of 425 basis points. Pricing for the 1-B tranche was one-month LIBOR plus a spread of 1025 basis points.

The 1M-1 tranche is expected to receive ratings of Baa3(sf) from Moody’s and BBB(sf) from KBRA, Inc. The 1M-2 tranche is expected to receive ratings of B1(sf) from Moody’s and BB-(sf) from KBRA, Inc. The 1-B tranche will not be rated. Fannie Mae will retain a portion of the 1M-1, 1M-2, and 1-B tranches 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 Barclays Capital was the co-lead manager and joint bookrunner on this transaction. Citigroup, Credit Suisse, J.P. Morgan, and Wells Fargo Securities were co-managers. With this transaction, Fannie Mae continues the involvement of Minority, Women, Veteran, and Disabled-Owned Businesses in the CAS program, with both Multi-Bank Securities and Ramirez & Co. participating as selling group members.

Fannie Mae continues to issue notes based on an actual loss framework for Connecticut Avenue Securities transactions, in which any losses are passed through based on the realized losses of the loans following final disposition. The company significantly enhanced its disclosure data for investors to support this new framework, and published extensive information about its credit risk management practices, with the goal of providing additional transparency.

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. The reference pool for the Series 2016-C04 consists of more than 183,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $42.2 billion. The loans in this reference pool have loan-to-value ratios between 60 and 80 percent and were acquired from July 2015 through October 2015. 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.

For more information on this transaction and Fannie Mae’s approach to credit risk transfer, visit To view the periods in 2016 during which Fannie Mae may issue Connecticut Avenue Securities (CAS), please view our 2016 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 March 31, 2016.

Fannie Mae enables people to buy, refinance, or rent homes.

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