Fannie Mae’s CAS Deals Now Utilizing REMIC Structure

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In an effort to make the product more attractive to market participants, including real estate investment trust (REIT) investors and international investors, all of Fannie Mae’s Connecticut Avenue Series (CAS) credit risk transfer (CRT) deals will be issued using a REMIC structure, moving forward, the company says.

The company says it has priced its next CAS deal using the new REMIC structure.

CAS 2018-R07 is a $922 million note offering that consists of more than 98,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $24.3 billion.

The reference pool will include one group of loans compromised of collateral with loan-to-value ratios of 60.01% to 80.00% acquired from April through June 2018.

The loans are fixed-rate, generally 30-year term, fully amortizing and were underwritten using rigorous credit standards and enhanced risk controls, the company says.

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.

Fannie Mae will retain the full 1B-2H and 1A-H tranches.

This is Fannie Mae’s seventh and final credit-risk sharing transaction of 2018 under the CAS program.

“With this milestone offering, Fannie Mae has enhanced the CAS program in a way that makes it more attractive to a broader range of investors over the long run,” says Laurel Davis, vice president for credit risk transfer, Fannie Mae. “It marks our latest and the most substantial innovation in five years of progress to reduce risks to U.S. taxpayers in the secondary mortgage market and deepen the sources of sustainable liquidity for U.S. mortgage lenders. We expect to return to the market with this new structure in early 2019.”

With the completion of the transaction, Fannie Mae will have brought 30 CAS deals to market since the program began, issued $36 billion in notes, and transferred a portion of the credit risk to private investors on over $1 trillion in single-family mortgage loans as part of the CAS program.

Since 2013, Fannie Mae has transferred a portion of the credit risk on approximately $1.6 trillion in single-family mortgages through all of its risk transfer programs.

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