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Fannie Mae has priced its first Connecticut Avenue Securities (CAS) Seasoned B-Tranche transaction, representing the third CAS transaction of 2020. CAS 2020-SBT1 is a $966 million security offering that references loans that were included in 2015 and 2016 CAS deals. Fannie Mae's issuance program is designed to share credit risk on its single-family conventional guaranty book of business.
"This marks our second transaction in an ongoing program to transfer risk on our seasoned loan book. These transactions offer investors a different profile than our ongoing benchmark CAS REMIC transactions. We were pleased to see the strong demand for the deal, especially in light of the backdrop of global market volatility," said Laurel Davis, VP of Credit Risk Transfer, Fannie Mae. "We plan to return to the market in late March with our next benchmark CAS REMIC."
According to Fannie Mae, the CAS issuer strategy works to build program in a sustainable way to promote liquidity. Similiarly, the GSEs are looking to expand liquidity through the Uniform Mortgage-Backed Security (UMBS).
"As we enter the seventh year of the CAS program, we are pleased to see the growth, stability, and liquidity of this market supported by a deep and diverse investor base," said Davis. "Our single-family credit risk transfer programs recently crossed a significant milestone, transferring a portion of credit risk on over $2 trillion in underlying loans since 2013. Subject to market conditions, we plan to return to market in mid-February with a high-LTV CAS deal."
The reference pool for CAS Series 2020-SBT1 consists of over 700,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $152 billion. The reference pool, with loans acquired from 2014 to 2016, includes one group of loans comprised of collateral with loan-to-value ratios of 60.01 to 80.00 percent and another group comprised of collateral with loan-to-value ratios of 80.01 percent to 97.00 percent. 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.
Fannie Mae will retain a portion of the 1M-2, 1B-1, 2M-2, and 2B-1 tranches in order to align its interests with investors throughout the life of the deal. Fannie Mae will retain the full 1B-2 and 2B-2 first-loss tranches.
With the completion of this transaction, Fannie Mae will have brought 41 CAS deals to market, issued $47 billion in notes, and transferred a portion of the credit risk to private investors on nearly $1.5 trillion in single-family mortgage loans, measured at the time of the transaction.
