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Investments

Fannie Mae prices second credit risk-sharing deal

M-1, M-2 tranches price at tighter spreads

Fannie Mae
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Fannie Mae priced its second credit-risk sharing transaction Tuesday, noting the deal's M-1 and M-2 tranches came in with lower spreads when compared to the first risk sharing deal launched by the GSE last year.   

The GSE's latest $750M note offering is scheduled to close on Jan. 27.

The series 2014-C01 transaction gives Fannie another outlet for managing credit risk within its book of mortgage guaranty business.

The M-1 tranche pricing came in at one-month LIBOR plus a spread of 160 basis points. Meanwhile, pricing for the M-2 tranche equaled one month LIBOR plus a spread of 440 basis points.

Comparatively, the first deal that rolled out in November featured an M-1 tranche that priced at one-month LIBOR plus a spread of 200 basis points, while its M-2 tranche came in at one-month LIBOR plus a spread of 525 basis points.

Typically, tighter pricing is indicative of growing investor confidence.

Breaking the second transaction down, the deal is linked to more than 122,000 single-family mortgages with an outstanding unpaid principal balance of $29.3 billion. This reference pool is also made up of a random selection of eligible loans acquired in the fourth quarter of 2012. The loans associated with it include fixed-rate, 30-year term, fully amortizing mortgages with LTV ratios between 60% and 80%.

"We’ve learned that the market has an appetite for consistency and we plan to respond by bringing regular C-deals to the market this year,” said Laurel Davis, vice president for credit risk transfer at Fannie Mae. "We are pleased to continue the momentum and strong investor interest of our inaugural transaction by reducing taxpayer risk and attracting additional private capital, while preserving an efficient TBA market."

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