Fannie Mae’s $1.4B REMIC Has Five-Year Paper

(Save the date: RealShare Apartments comes to the Westin Bonaventure, Los Angeles, October 24.)

WASHINGTON, DC-Fannie Mae has priced its latest multifamily DUS REMIC, a security totaling $1.4 billion, under its Fannie Mae Guaranteed Multifamily Structures program. Like it did last month, Fannie Mae diverged from its usual structure and included two tranches, instead of its typical 10-year tranche—but instead of the seven-year tranche that it offered last time, it offered a five-year tranche.

“Last month’s deal we did to basically set up this one,” Kimberly Johnson, vice president of Multifamily Capital Markets, explains to GlobeSt.com. “This time we went more extreme with the five-year tranche.”

In short, there is a substantial amount of short-term paper in this transaction--far more than one would expect given the paucity of five-year paper in the market. Johnson explained that Fannie Mae used 10-year loans that had rolled down to five years and placed them in the tranche. These were all high-quality loans originated in 2006 and 2007 that were residing in Fannie Mae’s portfolio. “We decided to sell it to meet the public demand for it,” she says. Demand is strong for this paper, Johnson speculates, because of the current shape of the yield curve.

The offering priced well, and was well received, according to Johnson. “We had eight new investors, all of which in the five-year tranche,” she says. The new investors were money managers, banks and insurance companies. All together there were 35 investors and Johnson believes that will translate into strong secondary market activity.

Will the GSE do this regularly going forward? Johnson, understandably, doesn’t commit other than to say “we were pleased with the execution and anticipate offering it again.” JP Morgan served as the lead manager of the transaction.