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Investments

Fannie Mae prices risk-sharing deal

More than 70 investor groups participate

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The first Connecticut Avenue Securities series, a risk-sharing mortgage bond deal from Fannie Mae, successfully priced to a diverse group of private investors.

The $675 million note-offering spreads some credit risk into the private market. Freddie Mac did a similar deal first, but Fannie Mae got theirs rated. The Fannie deal closed late last week, and the government-sponsored enterprise released some details concerning that closing.

Freddie said future deals would be rated, and that the timetable to do so for its inaugural risk-sharing transaction was not implementable.

The deal is backed by a reference pool of more than 112,000 single-family mortgages with an outstanding unpaid principal balance of $27 billion.

"Pricing for the M-1 tranche was one-month LIBOR plus a spread of 200 basis points. Pricing for the M-2 tranche was one-month LIBOR plus a spread of 525 basis points," said Fannie Mae is a statement. "About 75 broadly-diversified investors participated in the offering, including asset managers, mutual funds, pension funds, hedge funds, insurance companies, banks, and REITs."

Andrew Bon Salle, executive vice president for underwriting, pricing and capital markets at Fannie Mae said the government-sponsored enterprise is happy to see such a broad group of investors taking part.

"By sharing risk with investors, Fannie Mae will continue to provide much needed liquidity to the market while attracting private capital participation in the housing market," Bon Salle said. "The Connecticut Avenue Securities program was structured so that it does not impact the To Be Announced market, and is scalable and flexible enough to incorporate market feedback into future issuances."

According to Fannie, about 75 broadly-diversified investors participated in the offering, including asset managers, mutual funds, pension funds, hedge funds, insurance companies, banks, and REITs.

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