Page 44 - September October 2018 Disruption Report Flip Book

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Fannie Mae launches its first CRT using a REMIC structure
On October 29, Fannie Mae rolled out its first transaction that offloads credit risk it insures, using a real estate mortgage investment conduit (REMIC). Previously, Fannie primarily obtained reinsurance through its Connecticut Avenue Securities program, using a credit-linked note. The performance of the securities is linked to a reference pool of mortgages, but are the general obligation of the government-sponsored enterprise.
Using this REMIC-based transaction, the notes in the Connecticut Avenue Securities 2018-R07 will be issued by a bankruptcy remote trust. (Fannie facilitated this change by making a REMIC tax election on a majority of single-family loans that it acquires and guarantees, effective May 1.) This new structure reduces the risk, however remote, that Fannie would fail to repay the bonds. By using a REMIC structure, the potential investor base for Connecticut Avenue Securities makes the program more attractive to real estate investment trusts as well as certain other investors. (National Mortgage News, Alison Bisbey, 10/30/18)
Fannie Mae issues a $2 billion Secured Overnight Financing Rate transaction
On October 25, Fannie Mae priced its second issuance of Secured Overnight Financing Rate (SOFR) securities, issuing $2 billion of 6-month, $1.5 billion of 12-month, and $1.5 billion of 18-month floating-rate corporate debt. Building on its first SOFR issuance in July 2018, Fannie Mae leads the market in the development of SOFR as a key market index in support of the Alternative Reference Rate Committee’s (ARRC) efforts.
“By combining our first issuance that has now rolled down the curve, the market has the benefit of six maturity points,” said Nadine Bates, Senior Vice President and Treasurer, Fannie Mae. “The total orders exceeded $18 billion from a broad array of investors, attesting to the market’s increased readiness and acceptance of SOFR.” (Press Release, Fannie Mae, 10/25/18)
Fannie Mae appoints Hugh Frater as its interim CEO
Fannie Mae announced the appointment of Hugh Frater as its interim CEO, subject to final FHFA approval. Frater succeeds Timothy Mayopoulos, who left the enterprise on October 15. Frater has served on Fannie Mae’s board of directors since 2016. He previously led led Berkadia Commercial Mortgage LLC, a national commercial real estate company that provides comprehensive capital solutions and investment sales advisory and research services for multifamily and commercial
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