Fannie Mae off-loading some credit risk
Oct. 22, 2013 – Fannie Mae has created a new debt issuance that is aimed at transferring more risk to the private sector, in keeping with expectations set for the government-sponsored enterprise by the Federal Housing Finance Agency.
During an industry call Monday that included NAFCU, Fannie Mae staff said the new debt issuance, Connecticut Avenue Securities, will not only transfer a portion of the credit risk associated with the pool of loans but is also part of Fannie’s fulfillment of its regulator’s directives contained in FHFA’s scorecard for the GSEs for 2013. Fannie’s debt issuance is similar to Freddie Mac’s Structured Agency Credit Risk debt notes issued in July. Investors, including credit unions, are not guaranteed full payment on the debt issuance.
The current issuance involves $675 million from a pool of loans made in the third quarter of 2012. The issuance (Series 2013-C01) was provided on Oct. 15 and is scheduled to settle this Thursday.
Fannie said the issuance is from a pool of about 112,000 loans with unpaid balances totaling about $27 billion; these represent about 11 percent of originations Fannie acquired in the third quarter. The loans are 30-year, fixed-rate loans with 60 percent to 80 percent loan-to-value ratios. They exclude refinances under the Home Affordable Refinance Program.
Fannie and Freddie are planning to issue more such notes in the future.
FHFA's 2013 scorecard for GSEs