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Fannie Mae Shares More of the Risk with Private Investors

jarofcashFannie Mae [1] has priced its latest credit risk sharing transaction [2] in the Connecticut Avenue Securities (CAS) at $945.1 million, and the transaction is scheduled to settle on February 18, according to an announcement from Fannie Mae.

The transaction is Fannie Mae’s 10th in the CAS series over the last two-plus years since the program’s inception. The program was launched shortly after Freddie Mac’s Structured Agency Credit Risk (STACR) series; both of the programs, and other such as the Credit Insurance Risk Transfer (CIRT) program by Fannie Mae, are designed to reduce risk to taxpayers by transferring a portion of the risk on GSE residential single-family mortgage loans to private investors and increasing the role of private capital in the mortgage market.

Through the 10 CAS transactions, including the one expected to close on February 18, Fannie Mae has issued $13.4 billion in notes and transferred a portion of the credit risk to private investors on single-family loans totaling more than $467 billion in unpaid principal balance. Through all of its risk transfer programs [3], Fannie Mae has transferred a portion of the risk on more than half a trillion dollars in single-family mortgages.

“Fannie Mae continues to focus on the long term strength and stability of our Connecticut Avenue Securities program,” said Laurel Davis, VP of credit risk transfer, Fannie Mae. “We continue to work to build a deeper market for credit risk and are pleased with investor participation in the program. We’ve built a robust set of credit risk management tools that benefit Fannie Mae and the investors in our credit risk transfers. Fannie Mae will continue to innovate in the credit risk management space so that we can build a better housing finance system for the future.”

Fannie Mae shifted to an actual loss framework for CAS transactions beginning in October 2015. Under the new framework, any losses are passed through based on the realized losses of the loans following final disposition, according to Fannie Mae. For more information about the CAS series or Fannie Mae’s other credit risk sharing initiatives, click here [3].