WASHINGTON, DC-On Tuesday Fannie Mae announced pricing for its second credit risk sharing deal under the Connecticut Avenue Securities series–aka, its C-deal family–launched last year.
The $750 million note offering is scheduled to settle on January 27.
With investor interest well established the GSE plans to issue one C-deal a quarter, Laurel Davis, vice president for credit risk transfer at Fannie Mae, tells GlobeSt.com. “We had strong demand on the last transaction. This time we kept the structure exactly the same as investors had requested, for consistency.”
Briefly, in these credit risk-sharing transactions the GSE farms out some of the risk in its portfolio to private investors, leaving investors open to a full or partial loss of their initial principal investment. The amount of principal and principal paid by Fannie Mae is determined by the performance of the reference pool.
For this latest transaction, Series 2014-CO1, the reference pool includes more than 122,000 single-family mortgage loans with an outstanding unpaid principal balance of $29.3 billion. They are randomly selected eligible loans acquired in the fourth quarter of 2012; they tend to be fixed-rate, generally 30-year term, fully amortizing mortgages with LTV ratios between 60% and 80%.
Pricing for the M-1 tranche was one-month Libor plus a spread of 160 basis points. Pricing for the M-2 tranche was one month Libor plus a spread of 440 basis points. About 50 investors participated in the offering, including asset managers, mutual funds, pension funds, hedge funds, insurance companies, banks, and REITs.
The M-1 tranche is expected to receive investment grade ratings of BBB-sf by Fitch Ratings and (P) Baa2 (sf) by Moody’s Investor Service and the M-2 class was not rated. Fannie Mae retained the first loss and senior piece of the structure, as well as a vertical slice of the M1 and M2 tranches.
Last week Fannie Mae priced its first Multifamily DUS REMIC for the year, totaling $976.5 million. Josh Seiff, Fannie Mae director of Multifamily Capital Markets, said the agency is looking forward to a strong 2014 for the GeMS program.