Citing “overwhelmingly positive” investor response, Fannie Mae announced the pricing of its latest credit risk-sharing transaction under its Connecticut Avenue Securities series.

According to a release from Fannie Mae, the pricing of Connecticut Avenue Securities 2015-C03 was mixed when compared to its previous CAS deal.

CAS 2015-C03 priced as follows:

  • Pricing for both the 1M-1 tranche and the 1M-2 tranche was one-month LIBOR plus a spread of 150 basis points
  • Pricing for both the 2M-1 tranche and the 2M-2 tranche was one-month LIBOR plus a spread of 500 basis points

Fannie’s previous risk-sharing deal, CAS 2015-C02 priced as follows:

  • Pricing for the 1M-1 tranche was one-month LIBOR plus a spread of 115 basis points
  • Pricing for the 1M-2 tranche was one-month LIBOR plus a spread of 400 basis points
  • Pricing for the 2M-1 tranche was one-month LIBOR plus a spread of 120 basis points
  • Pricing for the 2M-2 tranche was one-month LIBOR plus a spread of 400 basis points

According to Fannie Mae, this latest transaction included participation from a broadly diversified group of both new and existing investors.

The $1.56 billion note offering is scheduled to settle on July 22.

The 1M-1 tranche is expected to receive ratings of BBB-sf by Fitch Ratings and A3(sf) by Moody’s Investors Service.

The 2M-1 tranche is expected to receive ratings of BBB-sf by Fitch Ratings and Baa1(sf) by Moody’s.

The 1M-2 tranche and 2M-2 tranche were not rated.

Fannie Mae retained the first loss and senior piece of the structure, as well as a vertical slice of the M1 and M2 tranches in both groups in order to align its interests with investors throughout the life of the deal.

According to Fannie Mae, the reference pool for the Series 2015-C03 transaction contains over 225,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $48.3 billion.

This reference pool consists of eligible loans acquired from May through August 2014, and is part of Fannie Mae’s new book of business that was underwritten using strong credit standards and enhanced risk controls. 

The loans included in this transaction are fixed-rate, generally 30-year term, fully amortizing mortgages and the reference pool is subdivided into two loan groups by original loan-to-value ratio.

Group one includes loans with original LTV ratios between 60.01 and 80.00%. 

Group two includes loans with original LTV ratios between 80.01 and 97.00%.

“Despite various factors causing uncertainty in many global markets, we brought another successful CAS deal to the market and attracted new investors to the program,” said Laurel Davis, vice president for credit risk transfer at Fannie Mae.

“As the leading manager of credit risk in the industry, we focus on consistent underwriting standards, cutting-edge quality control tools, and superior loss mitigation practices to reduce credit losses, which benefits our CAS investors,” Davis continued.

“Our strategy has been to come to market once a quarter with regular, consistent transactions that investors can plan for and we continued to demonstrate that philosophy with this deal,” Davis concluded. “Feedback from investors in the program continues to be overwhelmingly positive.”