Fitch Ratings released a pre-sale report expecting to rate the risk-sharing portion of the Fannie Mae Connecticut Avenue Securities at triple-B.
It's the second of its kind and widely anticipated. It also bears heavy similarity to the first deal in that the notes issued are unsecured obligations of Fannie Mae and have the same priority as all other unsecured debt, according to Fitch. The history of the program, as well as Freddie Mac's similar initiatives can be found here.
As with the earlier deal, the $375 million risk-sharing tranche represents a small portion of the overall $29.3 billion deal.
Fitch reports that Fannie is improving its quality control. And with housing expected to continue to perform adequately, Fitch does not see Fannie Mae having any difficulties paying the private investors who take on this credit risk.
"The rating analysis includes an assumption that the loans will experience defect rates consistent with historical rates and that those defects will not be repurchased," the Fitch pre-sale report reads.
Risk sharing is one strategy being implemented to slowly bring private investors back into the mortgage finance market. another is by raising the g-fees Fannie and Freddie charge to do business. However Mel Watt, the new Federal Housing Finance Agency director, delayed raising this cost.
The triple-B rating will face heavy downgrades in the off chance the FHFA decides to move Fannie Mae into receivership.