As predicted by Fitch Ratings earlier this week, Fannie Mae is indeed preparing to issue its first actual loss credit risk-sharing deal, perhaps as early as the fourth quarter of 2015.
In a report Wednesday, Fitch said that it expected Fannie Mae to join its GSE counterpart, Freddie Mac, in issuing actual loss credit risk-sharing deals, citing continually positive investor response as a significant factor.
Fannie Mae confirmed those plans Thursday in a release announcing the pricing for its latest credit risk-sharing transaction under its Connecticut Avenue Securities series.
Fannie Mae said that Connecticut Avenue Securities 2015-C03 will be its final fixed severity deal and expects to come to market with its first actual loss deal as early as the fourth quarter of 2015.
Fannie Mae noted that in preparation for marketing its first actual loss deal, it plans to release an enhanced single-family loan performance dataset that provides credit performance information up to and including property disposition.
Freddie Mac began making loan-level loss data available to investors in November.
At the time, Freddie said that it was making the data available in an effort to increase investor transparency, and expected the loan-level data to help investors build more accurate credit performance models in support of Freddie’s credit risk-sharing offerings.
According to Freddie, loan-level actual loss data was added to its single-family loan-level historical dataset, which covers approximately 17 million 30-year, fixed-rate, single-family mortgages originated between January 1, 1999, and June 30, 2013.
Market demand actually caused Freddie Mac to increase the size of its first Structured Agency Credit Risk series offering featuring actual loss positions.
“The significance of the actual loss deals is that they increase the amount of risk that the GSEs are able to offload,” said Fitch Director Sean Nelson said earlier this week.
“We expect actual-loss transactions to become more common in the future as they provide this type of risk-offload for the GSEs and are likely more sustainable over the long-run,” Nelson continued.
In addition to releasing its enhanced single-family loan performance dataset, Fannie Mae also said that will host web tutorials to “help the market get the most out of this extensive amount of research data.”
Since the program began in October 2013, Fannie Mae has issued $10 billion in notes through CAS and transferred credit risk to private investors on single-family mortgage loans with an outstanding unpaid principal balance of over $390 billion.
And soon it will have another vehicle to help increase the role of private capital in the mortgage market and further reduce taxpayer risk.