Mortgage-backed securities investors were carefully eyeing an inventive first-of-its-kind residential MBS deal launched last week by Bear, Stearns & Co., which securitizes Countrywide Home Loans' excess servicing portfolio, made up of Fannie Mae collateral.

The transaction, entitled FNSTRI 305, is a derivative-style interest-only (IO) strip deal backed by 242,000 loans, representing $30 billion in collateral. It has been garnering significant attention from investors both because of its potential to limit investors' prepayment risk and because it is the first time such an IO deal has been done in the agency sector.

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