Fannie Mae is in the market with its fifth offering of Connecticut Avenue risk sharing notes, according to a presale report published by DBRS.
The notes issued under Fannie Mae Connecticut Avenue Securities, Series 2014-C04 are general obligations of Fannie Mae but performance is subject to the credit risk on $53.8 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.
DBRS expects to assign a BBB’ rating to $340 million of 10-year 1M-1 notes that benefit from 2% subordination from other classes of notes retained by Fannie; it expects to assign the same rating to $205 million of 10-year 2M-1 notes that benefit from 2.5% subordination.
Similar to 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 the first three transactions, only loans in which the borrower had financed no more than 80% of the purchase price were referenced.
Loans in the pool are, on average, 14 months seasoned and have a maximum age of 17 months. 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, according to the presale report.