The latest note offering in the CAS series (Series 2015-C02) is scheduled to settle on May 27 and is consistent with prior transactions. This transaction includes reference loans with original LTVs up to 97 percent, according to Fannie Mae. This is the seventh CAS transaction since the inception of the program.
"We were pleased to bring another strong CAS issuance to the market and were pleased with the broad participation and the strength of the book. This deal reinforces continued investor interest in the consistency of the CAS program and interest in opportunities for exposure to the national housing market," said Laurel Davis, VP for credit risk transfer at Fannie Mae. "We expect to continue to come to market with programmatic issuance on a quarterly basis, subject to market conditions, and look forward to preparing the market for our transition to an actual loss structure late this year. In the meantime, we remain committed to building liquidity and stability for the CAS program by offering regular, predictable issuance and a consistent deal structure and size. This approach has generated positive feedback from investors."
A large and diverse reference pool determines how much periodic principal and ultimate principal will be paid by Fannie Mae. The reference pool for this transaction includes more than 215,000 residential single-family mortgage loans with an unpaid principal balance (UPB) of about $45 billion, according to Fannie Mae. The loans in the transaction are part of Fannie Mae's new book of business underwritten with stronger credit standards and enhanced risk controls, acquired during a four-month period from December 2013 to April 2014. The loans are fixed-rate and generally 30-year, fully amortizing mortgages.
The reference pool is subdivided into two groups: One with original LTV ratios from 60.01 and 80 percent and one with original LTV ratios from 80.01 to 97 percent, according to Fannie Mae. Both new and existing investors participated in this transaction.
Pricing is as follows:
- 1M-1 tranche – One-month LIBOR, spread of 115 basis points
- 1M-2 tranche – One-month LIBOR, spread of 400 basis points
- 2M-1 tranche – One-month LIBOR, spread of 120 basis points
- 2M-2 tranche – One-month LIBOR, spread of 400 basis points
The lead structuring manager and joint bookrunner for the transaction was JP Morgan Securities, LLC, and Bank of America Merrill Lynch was the co-lead manager and joint bookrunner, according to Fannie Mae. Co-managers were Barclays Capital, Inc., Citigroup, Inc., and Credit Suisse, and The Williams Capital Group was a selling group member in the transaction, according to Fannie Mae.
For more information on the transaction, including Fannie Mae's approach to credit risk transfer, click here.