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Fannie Mae Prices $1.134B Transaction Amidst “Market Volatility”

Fannie Mae [1] has priced Connecticut Avenue Securities (CAS) Series 2020-R02, a $1.134 billion note offering that represents Fannie Mae’s second CAS REMIC transaction of the year.

“We are pleased with the strong execution for CAS 2020-R02 in the face of broader market volatility, and we believe that the fundamentals of the U.S. housing market remain strong,” said Laurel Davis, VP of Credit Risk Transfer, Fannie Mae. “Subject to market conditions, we plan to return to market in late-February with our inaugural CAS Seasoned B-Tranche deal, CAS 2020-SBT1. The transaction will transfer a portion of risk previously retained by Fannie Mae on certain CAS deals issued in 2015 and 2016.”

According to Fannie Mae, the CAS issuer strategy works to build a program in a sustainable way to promote liquidity. Similarly, the GSEs are looking to expand liquidity through the Uniform Mortgage-Backed Security (UMBS).

Earlier this year, Fannie Mae received upgraded designations for the 2019 filing year from the National Association of Insurance Commissioners (NAIC). Four CAS M-2 bonds were upgraded to an NAIC 1 designation and two M-2 bonds were upgraded to an NAIC 2 designation.

The CAS bonds which received upgraded NAIC Designations in the 2019 filing year are listed here. CAS REMIC transactions are issued out of a bankruptcy remote trust, rather than as direct debt of Fannie Mae.

The reference pool for CAS Series 2020-R02 consists of approximately 111,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $29 billion. The reference pool includes one group of loans comprised of collateral with loan-to-value ratios of 80.01 percent to 97.00 percent, the majority of which were acquired from June through September 2019. The loans included in this transaction are fixed-rate, generally 30-year term, fully amortizing mortgages and were underwritten using rigorous credit standards and enhanced risk controls.