Fannie Mae offered the 1M-1, 1M-2 and 1B-1 tranches to investors, which priced at 75bps, 240bps, and 435bps over 1-month LIBOR, respectively. While those were all within the tight ranges of initial guidance, spreads are generally wider on the back of recent market volatility that has spilled over from equity markets.
Fannie retained the B-2 tranche, representing the lowest risk exposure.
According to a person familiar with the transaction, the investor base included a number of REITs and international investors, the classes that were targeted with the new real estate investment conduit (REMIC) structure, although a greater number of parties are hoped to participate in future deals. The deal was several times oversubscribed, according to the source. Bank of America was left lead on the deal and JP Morgan was the lead right arranger.
By issuing the notes through a REMIC, Fannie Mae will both remove counterparty risk by issuing CRT debt via third-party REMIC trust rather than directly through the GSE directly. They are also eligible for REIT purchase. Currently, CRT deals are issued as Fannie Mae corporate debt.
The deal is similar in nature to many of its prior CRT deals, transferring a portion of the credit risk on a pool of around 98,000 mortgages with loan-to-value ratios between 60-80% and a total outstanding unpaid principal balance of $24.3bn.