Fannie Courts Investors as It Plans Risk-Sharing Deal

Fannie Mae, preparing its first sale of securities that would share the risks of homeowner defaults with bondholders, will offer better terms than in Freddie Mac’s initial deal as the U.S.-backed mortgage companies seek to expand investor participation in the market.

Fannie Mae officials are visiting investors across the country, with stops in Boston and Cincinnati this week, as it attempts to sell $675 million of the debt at lower yields than Freddie Mac got in its $500 million offering in July, said three people with knowledge of the sale who asked not to be named because details are private. Under Fannie Mae’s terms, bondholders won’t suffer losses until delinquencies are higher.

U.S. regulators see the notes as a way to reduce the dominance of the two government-controlled firms and assess if they’re charging enough to guarantee their traditional mortgage bonds, embracing a risk-sharing approach that may play a central role in the future of the $9.3 trillion U.S. mortgage market.

“These are the proverbial baby steps,” said Anthony B. Sanders, an economics professor at George Mason University in Fairfax, Va., and former head of mortgage-bond research at Deutsche Bank AG.

Fannie Mae’s sale, planned for next month, reflects U.S. attempts to reduce its role, with the current share of new mortgages financed by taxpayer-backed programs at about 85%. Fannie Mae and Freddie Mac, which were seized by the U.S. five years ago this month amid the worst housing slump since the 1930s, account for about two-thirds of the market.