Credit Risk Sharing - News

Update for Fannie Mae's Connecticut Avenue Securities (CAS) REMIC

To facilitate MBS market analysis

Fannie Mae is releasing additional information related to its proposal to enhance its Connecticut Avenue Securities(CAS) credit risk transfer program. The proposal enables Fannie Mae to structure future CAS offerings as notes issued by trusts that qualify as Real Estate Mortgage Investment Conduits (REMICs). This announcement includes:

  • Our response to questions posed by the Securities Industry and Financial Markets Association (SIFMA) regarding the proposal.
  • An updated memorandum from Katten Muchin Rosenman LLP detailing its securities law analysis of Mortgage-Backed Securities (MBS) pooled after this enhancement. The memorandum includes the additions and revisions that we currently anticipate making to our Single-Family MBS Prospectus and Single-Family MBS Trust Agreement, if we proceed with this enhancement. These targeted enhancements have been designed to facilitate the REMIC election and are intended to be beneficial to our MBS investors.
  • An updated memorandum from Dechert LLP providing greater detail about the proposed REMIC structure and a summary of tax considerations for investors in MBS and CAS notes.

By delivering these further details, our objective is to enable MBS market participants to conclude that the proposed change would not adversely impact the To-Be-Announced (TBA) MBS market.

Since our initial announcement, Fannie Mae has solicited market feedback on the proposal. Feedback on the proposal, both domestically and internationally, has been favorable. No concerns regarding the MBS market have been raised to date and, provided that the market continues to respond favorably, we expect to conclude our feedback period in the very near term.

Background

On May 8, 2017, Fannie Mae announced a proposal to enhance its CAS credit risk transfer program by structuring future CAS offerings as notes issued by trusts that qualify as REMICs. Fannie Mae would facilitate this change by making a REMIC tax election on a majority of single-family loans that we acquire and guarantee. This enhancement to our CAS program is designed to promote the continued growth of the market by expanding the potential investor base for these securities, making the program more attractive to Real Estate Investment Trust (REIT) investors, as well as certain other investors, and limiting exposure to investors from Fannie Mae counterparty risk.

Market participants may contact the Fannie Mae Investor Help Line at 1-800-2FANNIE or by e-mail with any questions or to provide any additional feedback on the proposal. For more information, please review the following related links: