October 24, 2019Fannie Mae Prices Inaugural Multifamily Connecticut Avenue Securities Deal
Landmark $472.7 Million Transaction Complements Fannie Mae's Multifamily Credit Insurance Risk Transfer and Delegated Underwriting and Servicing Loss-Sharing Programs
WASHINGTON, DC – Fannie Mae (FNMA/OTCQB) priced its first Multifamily Connecticut Avenue Securities® (MCAS™) transaction as part of the company's ongoing efforts to expand the types of loans covered and promote the continued growth of the credit risk transfer market. MCAS Series 2019-01 is a $472.7 million note offering that complements Fannie Mae's Delegated Underwriting and Servicing (DUS®) and Multifamily Credit Insurance Risk Transfer (MCIRT™) programs.
"We continue to innovate and improve our credit risk transfer programs, and our MCAS transactions are the next step in the programs' development," said Jonathan Gross, Vice President, Multifamily, Fannie Mae. "This deal leverages our existing credit risk transfer structures to create another sustainable, scalable avenue to manage capital and overall taxpayer risk in our multifamily book of business. We were pleased with the broad market participation in the deal."
The reference pool for MCAS Series 2019-01 consists of approximately 340 multifamily mortgage loans with an outstanding unpaid principal balance of approximately $17 billion. The reference pool includes first-lien multifamily loans comprised of collateral underwritten according to Fannie Mae's standards and acquired by Fannie Mae from April 2018 through December 2018.
The loans included in this transaction are a combination of fixed-rate and adjustable-rate multifamily mortgages with unpaid principal balances equal to or greater than $30 million that have terms less than or equal to 12 years, in addition to other select eligibility requirements.
Fannie Mae will retain a portion of the M-7, M-10, B-10 and C-E reference tranches in order to align its interest with investors throughout the life of the offering. Fannie Mae will retain the first loss tranche.
|Class||Offered Amount ($MM)||Pricing Level||Expected Initial Credit Support (%)1|
|M-7||$80.7||1-month Libor plus 170 bps||3.785|
|M-10||$327.1||1-month Libor plus 325 bps||1.170|
|B-10||$41.3||1-month Libor plus 550 bps||0.840|
|C-E||$23.6||1-month Libor plus 875 bps||0.651|
1 Based on an allocable portion of $13.2 billion on an aggregate unpaid principal balance of $17.1 billion as of the cut-off date. The allocable portion represents Fannie Mae's credit exposure net of DUS lender loss sharing.
Credit Suisse is the lead structuring manager and bookrunner and BofA Securities, Inc. is the non-structuring lead manager. The selling group member is Ramirez & Co.
For more than 30 years, Fannie Mae has successfully shared credit risk with our lender partners through the Delegated Underwriting and Servicing (DUS) program, which requires our DUS lenders to retain a portion of credit risk on multifamily loans they deliver to us. To complement the DUS program, we introduced our Multifamily Credit Insurance Risk Transfer (MCIRT) program in June 2016 to transfer a portion of the credit risk, post acquisition, on multifamily mortgages to reinsurer and insurer counterparties.
In 2019, to support our growing credit risk transfer capabilities, we published the Multifamily Loan Performance Data on our website, which presents loan level credit performance data on 19 years of Fannie Mae multifamily production. Providing this data promotes better understanding of the credit performance and gives market participants information to further analyze our loan performance history.
More information on Fannie Mae's credit risk transfer activities is available at: http://www.fanniemae.com/portal/funding-the-market/credit-risk/index.html.