WASHINGTON, DC—Fannie Mae has launched the third, and largest to date, offering in its Connecticut Avenue Securities (C-deals) series—a bundle of $1.6 billion loans with original loan-to-value ratios of up to 97%. Previous C-deal offerings included reference loans with up to 80% LTVs. The offering priced on Wednesday and is scheduled to settle on May 28. The GSE floated its last C-Series in January 2014, in a $750 million offering. Its first, a $675 million transaction, came to market in October.

The higher LTV in this series is not a surprise, says Laurel Davis, vice president for credit risk transfer at Fannie Mae. "As the market moves from a refinance market to a purchase money market, it is more common to see loans with higher LTVs."

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.

The reference pool for this latest transaction includes nearly 255,000 single-family mortgage loans with an outstanding unpaid principal balance of $60.8 billion. Pricing for the 1M-1 tranche was one-month LIBOR plus a spread of 95 basis points.

Pricing for the 1M-2 tranche was one month LIBOR plus a spread of 260 basis points. Pricing for the 2M-1 tranche was one-month LIBOR plus a spread of 95 basis points. Pricing for the 2M-2 tranche was one month LIBOR plus a spread of 260 basis points.

More than 60 investors participated in the offering, including asset managers, mutual funds, pension funds, hedge funds, insurance companies, banks, and REITs.

In the recently-released Federal Housing Finance Agency Director 2014 Scorecard for the GSEs, the agency called for the GSEs to each triple their risk-transfer transactions compared to last year's requirement.