Fannie Mae is readying its first credit risk transfer transaction of 2017.
Connecticut Avenue Securities, Series 2017-C01 will transfer credit risk on a pool of 180,187 high-quality mortgages that the government-sponsored enterprise acquired from March 2016 through June 2016.
In this transaction, Fannie Mae has only included one group of loans with loan-to-value ratios from 60%-80%. Overall, the reference pool's collateral characteristics are similar to recent CAS transactions and reflect the strong credit profile of post-crisis mortgage originations.
This will be Fannie Mae's ninth transaction in which noteholders will experience losses realized at the time of liquidation or modification, which will include both lost principal and delinquent or reduced interest, and not when the loans have been delinquent for 180 days.
Fannie Mae will be retaining credit risk in the transaction by holding the 1A-H senior reference tranche, which has an initial loss protection of 3.75%, as well as 100% of the first loss 1B-2H reference tranche, sized at 50 basis points. Fannie Mae is also retaining an approximately 5% vertical slice/interest in the 1M-1, 1M-2A, 1M-2B and 1M-2C tranches and at least 5% of the 1B-1 tranche.