Fannie Mae is in the market with its fourth offering of Connecticut Avenue risk sharing notes, according to a presale report published by Fitch Ratings.

The notes are general obligations of Fannie Mae but performance is subject to the credit risk on $78.2 billion of mortgages that the agency guarantees.  As loans become 180 day delinquent or other credit events occur, the outstanding principal balance of the debt notes will be reduced by a pre-defined, tiered loss severity percentage related to those credit events.

Fitch Ratings expects to assign BBB- rating to $555 million of 10-year 1M-1 notes which benefit from 2% subordination from other classes of notes retained by Fannie and a BBB rating to $239.5 million of 10-year 2M-1 notes that benefit from 2.4% subordination.

As with Fannie’s previous offering of Connecticut Avenue securities, the reference pool of mortgages includes loans in which the borrower has financed up to 97% of the purchase price. In prior transactions, only loans in which the borrower had financed no more than 80% of the purchase price were referenced.

Also, approximately 1% of borrowers have made a late payment over the past 12 months, although the borrowers were current as of the cutoff date and had been current for the previous three months.

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