Fannie Mae Takes CAS Platform to Europe

WASHINGTON, DC—Fannie Mae has retroactively listed its Connecticut Avenue Securities on the Irish Stock Exchange in a move that is expected to add more liquidity to Fannie Mae's investor base.

Essentially what the GSE did was make these particular securities compliant with the EU's risk retention requirements, which wasn't that difficult as it was similar to Fannie Mae's own 5% risk retention requirement, Laurel Davis, vice president for credit risk transfer at Fannie Mae, tells GlobeSt.com.

One reason for the move is that there has been an increased interest on the part of European investors for the debt, especially since the European Commission began purchasing asset-backed securities and euro-denominated covered bonds last year. Investors found themselves crowded out of the market as a result and began looking further afield for debt to purchase.

Also, in general, investors all over the world have been on a hunt for higher yield, she adds.

European investors, though, have been particularly intrigued by housing debt, especially the US push into single-family home rental securitizations.

Hence the interest in Fannie Mae's CAS platform, which it launched in 2013. They are mortgage credit related securities in the residential space. After its debut deal in 2013, the GSE we issued four CAS transactions totaling $5.85 billion in note issuance and $222 billion in loan unpaid principal balance. It is on track for similar issuance this year.

European investors are also drawn to the large size of reference pools underlying a typical CAS transaction. "They are usually about $50 billion and are a very good way for someone outside the US to get representative exposure to the US housing market," Davis says.

These new investors will not crowd out the traditional US buyers of Fannie Mae debt, Davis says. Rather, they are eager to see the GSE expand its liquidity base. "They are always asking us how and when we will add liquidity to the program," she says.