Fannie Mae unveils $952 million CRT note offering 

This latest credit-risk transfer deal will bring Fannie’s note-offering tally to more than $6 billion this year

Fannie Mae has priced its fifth Connecticut Avenue Series (CAS) credit-risk transfer deal of 2022, a $952 million note offering backed by a reference pool of single-family mortgages valued at $38.5 billion. 

The offering is slated to close May 11, according to a presale review by the Kroll Bond Rating Agency (KBRA). A credit-risk transfer deal involves transferring a portion of the reference loan-pool risk to private investors through the CAS real estate mortgage investment conduit, or REMIC. 

This latest transaction, CAS 2022-R05, involves a reference pool of 127,166 single-family mortgage loans. The states with the largest concentrations of mortgages in the loan pool for the latest offering are California, 12.8%; Texas, 8.3%; Florida, 7.8%; Washington, 4%; and Georgia, 3.8%, according to KBRA. 

“The reference pool exhibits significantly more geographic diversification than most prime jumbo RMBS pools,” the KBRA presale report states. “Geographic diversity helps mitigate the risk that a regional economic recession or natural disaster will have an outsized impact on default rates.”

The leading originators for the loans in the offering and the percentage of loans originated in the reference pool are United Wholesale Mortgage, 8.7%; Pennymac, 7%; Rocket Mortgage, 6%; and Wells Fargo, 3.7%.

The loans in the reference pool have an average balance of $303,100, the KBRA report shows, with the maximum loan balance exceeding $1 million. The KBRA report also notes that only 4.1% of the loans in the reference pool were granted appraisal wavers. 

By contrast, in Fannie’s CAS credit-risk transfer (CRT) offering in early April, CAS 2022-R04, 32% of the loans in the reference pool were granted appraisal wavers. That resulted in KBRA applying “a broad valuation haircut” to those loans, according to the bond-rating firm’s presale report on that CRT deal.

Earlier this year, a Fannie executive said the agency, subject to market conditions, expects to issue $15 billion in notes through CAS transactions in 2022. This latest deal will bring the agency to about $6 billion in CAS notes issued to date.

The initial Fannie CRT deal of 2022, CAS 2022-R01, involved a $1.5 billion note issued against a reference loan pool of 180,002 residential mortgages with an outstanding principal balance of $53.7 billion.

CAS Series 2022- R02, the second offering this year, involved transferring loan-portfolio risk to private investors via a $1.2 billion note offering backed by a reference pool of 149,393 residential mortgage loans valued at $44.3 billion. 

CAS 2022-R03 involved transferring a portion of the agency’s loan-portfolio risk through a $1.24 billion note offering backed by a reference loan pool of 150,395 primarily single-family mortgages valued at $44.4 billion.

CAS 2022-R04, which closed last month, was a $1.14 billion note offering backed by a reference pool of some 118,000 single-family mortgages valued at $36 billion. 

With the completion of this fifth transaction, Fannie Mae will have brought 49 CAS deals to market, issued more than $56 billion in notes, and transferred a portion of the credit risk to private investors on more than $1.8 trillion in single-family mortgage loans, according to Fannie Mae’s tally of deals.

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