Fannie Mae priced its second credit risk transfer (CRT) transaction of the year, a $1 billion note offering consisting of more than 107,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $27 billion.
This is the third Fannie Mae Connecticut Avenue Series (CAS) deal to be offered using a REMIC structure, which essentially means that the mortgage pool (and, in this case, the related risk) is divided into tranches, based on loan characteristics.
Last fall, Fannie Mae announced that, moving forward, all of its CAS credit risk transfer deals will be issued using a REMIC structure, the goal being to make the program attractive to a wider range of investors.
“We were delighted to see that our second transaction of the year was met with high demand from a deep base of investors, including several first-time participants,” says Laurel Davis, vice president of credit risk transfer, Fannie Mae, in a statement. “Since the beginning of the year, we have seen a substantial number of new investors participate in the CAS program. We expect to return to the market with our next deal, CAS 2019-R03, another low-LTV transaction, at the end of March.”
The reference pool for CAS Series 2019-R02 will include one group of loans comprised of collateral with loan-to-value ratios of 60.01% to 80.00% acquired from May through September 2018. 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-1, 1M-2, and 1B-1 tranches in order to align its interests with investors throughout the life of the deal.
The company will retain the full 1B-2H tranche.