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Press Release

Fannie Mae Prices Second Connecticut Avenue Securities Risk Sharing Transaction of 2016

March 22, 2016

Callie Dosberg


WASHINGTON, DC – Fannie Mae (FNMA/OTC) has announced that it priced its latest credit risk sharing transaction under its Connecticut Avenue Securities (CAS) series. The $1.03 billion note offering is scheduled to settle on Wednesday, March 30th. After this transaction is completed, Fannie Mae will have completed 11 CAS deals since the program began, issued $14.4 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 more than $503 billion, increasing the role of private capital in the mortgage market and reducing taxpayer risk. Since 2013, Fannie Mae has transferred a portion of the credit risk on over $590 billion in single-family mortgages through all of its risk transfer programs. Fannie Mae’s next CAS transaction is planned for mid-April, and the company expects to be a regular issuer throughout 2016, subject to ongoing market conditions.

“We’re seeing a positive response from investors, who see strong fundamentals in mortgage credit risk and Fannie Mae mortgage credit risk in particular. The CAS program provides investors with consistent opportunities to benefit from Fannie Mae’s innovative and industry-leading credit risk management approach while gaining exposure to the U.S. housing market,” said Laurel Davis, vice president of credit risk transfer, Fannie Mae. “One of our primary areas of focus is to continue to work to expand the investor base, and with this deal we continued to see new investors come into the program.”

Pricing for the 1M-1 tranche was one-month LIBOR plus a spread of 215 basis points. Pricing for the 1M-2 tranche was one-month LIBOR plus a spread of 600 basis points. Pricing for the 1B tranche was one-month LIBOR plus a spread of 1225 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 1B tranche was not rated. Fannie Mae retained a portion of the 1M-1, 1M-2, and 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 Wells Fargo Securities, LLC was the co-lead manager and joint bookrunner on this transaction. Barclays Capital Inc., BNP Paribas Securities Corp., J.P. Morgan Securities, LLC, and Nomura Securities International, Inc. were co-managers. With this transaction, Fannie Mae continues the involvement of Minority, Women, and Disabled-Owned Businesses in the CAS program, with both CastleOak Securities, L.P. and Mischler Financial Group, Inc. participating as selling group members.

Fannie Mae continues to issue 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-C02 transaction contains over 146,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $36 billion. This reference pool consists of eligible loans with loan to value ratios between 60 and 80 percent acquired from March through May 2015, and is part of Fannie Mae’s new book of business that was 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.

For more information on this transaction and Fannie Mae’s approach to credit risk transfer, visit

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 "Business-Forward-Looking Statements" in the company's Form 10-K for 2015.

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

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