WASHINGTON, DC–Fannie Mae has priced its first GeMS REMIC backed exclusively by its Green MBS collateral. This $873 million issuance is the first of its kind in the US market, according to the GSE. It follows an earlier REMIC this year in which two of the tranches were backed by green collateral.

“This is a novel transaction,” Lisa Bozzelli, director of Multifamily Capital Markets at Fannie Mae tells GlobeSt.com. Not only is it the first time anyone has done an agency CMBS backed entirely by green collateral, she says, but unlike the earlier transaction, this new deal includes two tranches of green, seven-year fixed-rate MBS.

Specifically, the two tranches, AV1 and AV2, are backed by 20 seven-year loans originated under the Fannie Mae Green Financing Business and securitized as Green DUS MBS. The loans are secured by multifamily properties that have either achieved a Green Building Certification such as LEED, ENERGY STAR or Green Globes or were targeting a 20% or greater reduction in energy or water consumption.

Seven-year paper does tend to be less ubiquitous than ten-year paper — and even more so when it is backed by sustainable collateral. However, Fannie Mae's pipeline of green deals has been growing steadily: it issued $3.6 billion in green MBS last year; year-to-date that number has risen to $10.8 billion. “Including float I would say we have about $15 billion in green MBS out in the market,” Bozzelli says.

Fannie Mae introduced the Green MBS product to the market in 2012 but in those early years it generated relatively little paper.

Bozzelli attributes Fannie Mae's green collateral growth to its education of underwriters, lenders and, of course, investors.

“Green investors have been accustomed to doing project loans or equity deals but few have been MBS investors. We have worked hard to attract those people over to this community,” she says.

Both of the tranches were oversubscribed, with AV1 pricing at 27 to swaps and AV2 at 45 to swaps.

The deal is also significant from a portfolio management perspective, Bozzelli says. At $837 million, “AV2 was sizeable for us. It is a lot to put away.”

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Fannie Mae Prices CMBS Backed Entirely By Green Collateral

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