Fannie Mae (OTCQB: FNMA) priced its first Connecticut Avenue Securities® (CAS) Seasoned B-Tranche transaction, representing the third CAS transaction of 2020. CAS 2020-SBT1 is a $966 million security offering that references loans that were included in 2015 and 2016 CAS deals. Fannie Mae’s issuance program is designed to share credit risk on its single-family conventional guaranty book of business.
“This marks our second transaction in an ongoing program to transfer risk on our seasoned loan book. These transactions offer investors a different profile than our ongoing benchmark CAS REMIC transactions. We were pleased to see the strong demand for the deal, especially in light of the backdrop of global market volatility,” said Laurel Davis, Vice President of Credit Risk Transfer, Fannie Mae. “We plan to return to the market in late March with our next benchmark CAS REMIC®.”
The reference pool for CAS Series 2020-SBT1 consists of over 700,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $152 billion. The reference pool, with loans acquired from 2014 to 2016, includes one group of loans comprised of collateral with loan-to-value ratios of 60.01 to 80.00 percent and another group comprised of collateral with loan-to-value ratios of 80.01 percent to 97.00 percent. The loans included in this transaction are fixed-rate, generally 30-year term, fully amortizing mortgages, and were underwritten using rigorous credit standards and enhanced risk controls.
Fannie Mae will retain a portion of the 1M-2, 1B-1, 2M-2, and 2B-1 tranches in order to align its interests with investors throughout the life of the deal. Fannie Mae will retain the full 1B-2 and 2B-2 first-loss tranches.
|
Class |
Offered Amount ($MM) |
Pricing Level |
Expected Rating (Fitch) |
|
1M-2 |
$252.325 |
1-month Libor plus 365 bps |
B(sf) |
|
1B-1 |
$187.757 |
1-month Libor plus 675 bps |
This class will not be rated |
|
2M-2 |
$316.415 |
1-month Libor plus 365 bps |
B(sf) |
|
2B-1 |
209.906 |
1-month Libor plus 660 bps |
This class will not be rated |
Nomura Securities International, Inc. (“Nomura”) is the lead structuring manager and joint bookrunner and BofA Securities, Inc. (“BofA Securities”) is the co-lead manager and joint bookrunner. Co-managers are Citigroup Global Markets Inc. (“Citigroup”), Barclays Capital Inc. (“Barclays”), Morgan Stanley & Co. LLC (“Morgan Stanley”), and Wells Fargo Securities, LLC (“Wells Fargo Securities”). Selling group members are Mischler Financial Group, Inc., LLC and Ramirez & Co.
With the completion of this transaction, Fannie Mae will have brought 41 CAS deals to market, issued $47 billion in notes, and transferred a portion of the credit risk to private investors on nearly $1.5 trillion in single-family mortgage loans, measured at the time of the transaction.
The National Association of Insurance Commissioners (NAIC) has applied its approved modeling process to all 2018 and 2019 CAS REMIC transactions. All CAS REMIC M-1 classes are designated as zero-loss classes (NAIC 1). In 2019, Fannie Mae requested the NAIC Structured Securities Group (SSG) use the NAIC Approved Modeling Process to develop preliminary NAIC Designations and Breakpoints for a CAS REMIC transaction. View our announcement for details.
Fannie Mae’s deliberate issuer strategy works to build the CAS program in a sustainable way to promote liquidity and to build a broad and diverse investor base. To promote transparency and to help investors evaluate our program, Fannie Mae provides ongoing, robust disclosure data to help credit investors evaluate the program, as well as access to news, resources, and analytics through its credit risk transfer webpages. This includes Fannie Mae’s innovative Data Dynamics® tool that enables market participants to interact with and analyze both CAS deals that are currently outstanding in the market and Fannie Mae’s historical loan dataset. In addition, our robust EU Resources webpage helps European Union institutional investors and those managing funds subject to EU regulations comply with EU securitization regulation.
In addition to our 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 REMIC notes are issued by a bankruptcy-remote trust. 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, visit our credit risk transfer website.
