Resources for UK Investors (MCAS)

Resources for UK Institutional Investors

This information is intended to provide institutional investors located in the United Kingdom ("UK Institutional Investors") with resources to support their compliance with the UK Securitization Regulation (Regulation (EU) 2017/2402, as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018, as amended, and as amended by the Securitisation (Amendment) (EU Exit) Regulations 2019, referred to herein as the "Securitization Regulation"). Specifically, it describes how UK Institutional Investors or those managing funds subject to UK regulations can map the information disclosed for Fannie Mae's Multifamily Connecticut Avenue Securities® (MCAS) deals to certain investor due diligence requirements. Additionally, although Fannie Mae is not directly subject to the Securitization Regulation, this page also provides information regarding the obligations imposed on "originators".

IMPORTANT NOTE

UK Institutional Investors should note that Fannie Mae makes no representation and provides no assurance about the suitability or completeness of the published information in relation to any investor due diligence requirements or the application of any specific provisions of the Securitization Regulation to a non-UK securitization. UK Institutional Investors must independently verify and assess the published information with respect to the suitability or completeness required for purposes of such investors' compliance with any applicable due diligence framework or other regulation. UK Institutional Investors should consult with their own legal, accounting, and other advisors regarding the sufficiency of this information for their purposes.

Article 5 – Due Diligence Requirements

Article 5.1(b) – Credit granting based on sound and well-defined criteria and clearly established processes, with effective systems to apply criteria and processes

  • Although Fannie Mae does not originate or make mortgage loans directly to borrowers, it serves as a purchaser of loans in the secondary market and securitizes those loans into mortgage-backed securities. As such, Fannie Mae establishes and applies eligibility criteria for the loans it will purchase, sets standards for the lenders from whom it will purchase loans, and monitors compliance with these standards and eligibility criteria. Fannie Mae does not establish different criteria for loans that it securitizes and loans that it does not securitize. Information about Fannie Mae's credit granting criteria, along with information about the technologies and analytical processes it uses to ensure compliance with these criteria, is described in the Fannie Mae Multifamily Credit Risk Management presentation (PDF) under the sections "Underwriting Management", "Performance Management" and "Mitigation Strategies". Introductory information on Multifamily Credit Risk Transfer including a series of webinars and videos can be found on the Multifamily Credit Risk Transfer webpage.
     
  • For specific deals, information describing Fannie Mae’s credit granting criteria, quality assurance processes, and loan servicing standards is set forth in the “Loan Acquisition Practices and Servicing Standards” section of the relevant Offering Memorandum available through the Transactions page.
     
  • Fannie Mae conducts ongoing quality control reviews on a random sample of the mortgage loans it acquires. The quality control process is described in the "Quality Control" section of the relevant Offering Memorandum available through the Transactions page.
     
  • Fannie Mae publishes a comprehensive guide, the Delegated Underwriting and Servicing Guide, which provides requirements and guidance on various topics including underwriting, servicing and asset management. This information can be found on the Multifamily business section of Fannie Mae's website.
     
  • Information on Fannie Mae's business model, including how it finances credits, is described in the Fannie Mae Multifamily Credit Risk Management presentation (PDF) under the section "Multifamily Business Overview".


Article 5.1(d) – Retention of material net economic interest

  • To align Fannie Mae's interests with that of investors, Fannie Mae retains at least 5% of the nominal value of each offered tranche in the manner described in Article 6.3(a) of the Securitization Regulation. The specific interest retained by Fannie Mae for each deal is described in the EU/UK Risk Retention Letter available for each deal through the Transactions page. See also Article 6 below.


Article 5.1(f) – Information that is substantially the same as that required by Article 7 for "private" transactions

  • See Article 7 below, which describes the information Fannie Mae makes available to help UK Institutional Investors assess their compliance with this provision of Article 5.

 

  • Specifically, on a monthly basis, Fannie Mae makes loan-level data in the disclosure template for residential real estate (Annex 2) available for download through Data Dynamics®.

 

  • Fannie Mae provides loan-level issuance data and ongoing monthly performance data via CTS link, including loan- level data and other reports based on CREFC templates. In order to help UK Institutional Investors reconcile the MCAS download files with the applicable UK standards, Fannie Mae provides a file that maps the MCAS data fields and MCAS investor report information to the disclosure template for commercial real estate (Annex 3) and investor report template (Annex 12) of the the UK's onshored Commission Delegated Regulation (EU) 2020/1224 (available here). Download Fannie Mae – MCAS to FCA Mapping file: Excel or PDF

Article 5.3(a) – Risk characteristics of the individual securitization position

  • The risk factors associated with each investment are described in the “Risk Factors” section of the relevant Offering Memorandum available through the Transactions page.
     
  • Deal structure characteristics are contained in the Term Sheet for each MCAS transaction, available through the Transactions page.
     
  • Tables showing the sensitivity of note yields to variables such as prepayments, credit events, or write-down amounts are presented in the “Prepayment and Yield Considerations” sections of the relevant Offering Memorandum available through the Transactions page.


Article 5.3(a) – Risk characteristics of the underlying exposures

  • For each transaction, Fannie Mae provides loan-level issuance data and ongoing monthly performance data via CTS link, including loan-level data and other reports based on CREFC templates.
     
  • Risk characteristics of the underlying reference pools are discussed in the Offering Memorandum for each MCAS transaction, available through the Transactions page.


Article 5.3(b) – Structural features materially impacting the performance of the transaction

  • The specific structure of each MCAS issuance, including deal features such as contractual priorities of payment, priority of payment-related triggers, credit enhancements, and transaction-specific definitions of default, is described in the "Risk Factors", "Summary of Terms", and "Description of the Notes" sections of the relevant Offering Memorandum available through the Transactions page. There are no liquidity enhancements or market value triggers in MCAS transactions.
     
  • In advance of each transaction, key structural features of each deal are described in the Term Sheet made available to prospective investors by the underwriting syndicate prior to pricing. Term Sheets for past deals are available through the Transactions page. The dealer syndicate also distributes an Intex* cash flow file, which includes structural features such as payment priority and credit enhancement triggers that allows investors to model each transaction using various assumptions.

Article 5.4(a) – Monitoring parameters

  • For each transaction, Fannie Mae provides loan-level issuance data and ongoing monthly performance data via CTS link; including loan-level data and other reports based on CREFC templates. Such data includes, but is not limited to, detailed information related to loans on watchlist, loans that are more than 60 days past due (seriously delinquent), loans in foreclosure, loan modifications, and other metrics that are relevant to collateral performance.


Article 5.4(b) – Stress Testing

  • Fannie Mae does not provide analytical tools to directly perform stress testing on cash flows and collateral values; however, it makes transaction- and loan-level data publicly available so that vendors and other third-parties can provide analytics on the transactions. Cash flow engines or credit and prepayment models are available from vendors such as Bloomberg, Blackrock and Intex.*
     
  • Multifamily Loan Performance Data (MFLPD) provides loan performance history of Fannie Mae’s multifamily loans.
     
  • Tables showing the sensitivity of note yields to variables such as prepayments, credit events, or write-down amounts are presented in the "Prepayment and Yield Considerations" sections of the relevant Offering Memorandum available through the Transactions page.

Article 6 – Risk Retention Requirements

  • Fannie Mae retains at least 5% of the nominal value of each offered tranche in the manner described in Article 6.3(a) of the Securitization Regulation. The specific interest retained by Fannie Mae for each deal is described in the EU/UK Risk Retention Letter, available for each deal through the Transactions page.
  • All Multifamily loans acquired by Fannie Mae that are equal to or greater than $30M in unpaid principal balance (UPB) that are not a bond credit enhancement product or part of a structured product (i.e. Credit Facilities) are eligible to be included in MCAS reference pools. Fannie Mae selects loans to be included in MCAS reference pools with the goal of maximizing transaction sizes, rather than selecting loans on an individual or random basis.
     
  • For specific deals, information about the reference pool selection criteria is included in the relevant Offering Memorandum under the "Reference Pool Criteria and Process" section, available through the Transactions page.

Article 7 – Transparency Requirements

Article 7.1(a) – Information on the underlying exposures

  • Fannie Mae provides loan-level issuance data and ongoing monthly performance data via CTS link, including loan- level data and other reports based on CREFC templates. In order to help UK Institutional Investors reconcile the MCAS download files with the applicable UK standards, Fannie Mae provides a file that maps the MCAS data fields and MCAS investor report information to the disclosure template for commercial real estate (Annex 3) and ESMA investor report template (Annex 12) of the UK’s onshored Commission Delegated Regulation (EU) 2020/1224 (available here). Download Fannie Mae – MCAS to FCA Mapping file: Excel or PDF


Article 7.1(b) – Documentation essential for understanding transaction

  • Under U.S. federal securities law and practice, the Preliminary Offering Memorandum for each MCAS transaction, made available to prospective investors by the underwriting syndicate prior to pricing, is intended to provide all information needed to fully understand the transaction and make a fully informed investment decision. This includes deal structure diagrams, information related to risks of the investment, roles performed by the transaction parties, credit enhancement, cash flows, loss waterfall, deal triggers, deal termination events, and investor voting rights; and descriptions of the underlying collateral.
     
  • The final Offering Memorandum and other relevant documents are made available shortly after a transaction closes. These documents are available through the Transactions page.


Article 7.1(c) – Transaction summary or overview of main features

  • Each offering of MCAS securities is structured to qualify for an exemption from the requirement to prepare a prospectus in accordance with the UK Prospectus Regulation.
     
  • Nonetheless, under U.S. federal securities law and practice, the Preliminary Offering Memorandum for each MCAS transaction, made available to prospective investors by the underwriting syndicate prior to pricing, is intended to provide all information needed to fully understand the transaction and make a fully informed investment decision. This includes deal structure diagrams; information related to risks of the investment, roles performed by the transaction parties, credit enhancement, cash flows, loss waterfall, deal triggers, deal termination events, and investor voting rights; and descriptions of the underlying collateral.
     
  • The final Offering Memorandum and other relevant documents are made available shortly after a transaction closes. These documents are available through the Transactions page.


Article 7.1(e) – Investor reports

  • MCAS investor reports are made available on a monthly basis via CTS link. In order to help UK Institutional Investors reconcile the MCAS download files with the applicable UK standards, Fannie Mae provides a file that maps MCAS investor report information to the investor report template (Annex 12) of the UK's onshored Commission Delegated Regulation (EU) 2020/1224 (available here). Download Fannie Mae – MCAS to FCA Mapping file: Excel or PDF


Article 7.1(f) – Inside information

  • Fannie Mae is subject to U.S. securities laws prohibiting insider trading and selective disclosure to investors.


Article 7.1(g) – Significant events

  • As stated in the Offering Memorandum for each MCAS transaction, available on the Transactions page, Fannie Mae will provide notice to investors about specific events such as material breaches and certain amendments to transaction documents, and events potentially impacting the performance of the securities. Fannie Mae provides such information via CTS link, on the Credit Risk Transfer Commentary and News section of the Fannie Mae website, and via other means as specified in the Offering Memorandum.

Article 8 – Ban on Re-securitizations

  • No exposures in any MCAS issuances include securitization positions.

Article 9 – Criteria for credit-granting

  • Although Fannie Mae does not originate or make mortgage loans directly to borrowers, it serves as a purchaser of loans in the secondary market and securitizes those loans into mortgage-backed securities. As such, Fannie Mae establishes and applies eligibility criteria for the loans it will purchase, sets standards for the lenders from whom it will purchase loans, and monitors compliance with these standards and eligibility criteria. Fannie Mae does not establish different criteria for loans that it securitizes and loans that it does not securitize. Information about Fannie Mae's credit granting criteria, along with information about the technologies and analytical processes it uses to ensure compliance with these criteria, is described in the Fannie Mae Multifamily Credit Risk Management presentation (PDF) under the sections "Underwriting Management", "Performance Management" and "Mitigation Strategies". Introductory information on Multifamily Credit Risk Transfer including a series of webinars and videos can be found on the Multifamily Credit Risk Transfer webpage.
     
  • For specific deals, information describing Fannie Mae’s credit granting criteria, quality assurance processes, and loan servicing standards is set forth in the “Loan Acquisition Practices and Servicing Standards” section of the relevant Offering Memorandum available through the Transactions page.
     
  • Fannie Mae conducts ongoing quality control reviews on a random sample of the mortgage loans it acquires. The quality control process is described in the "Quality Control" section of the relevant Offering Memorandum available through the Transactions page.
     
  • Fannie Mae publishes a comprehensive guide, the Delegated Underwriting and Servicing Guide, which provides requirements and guidance on various topics including underwriting, servicing and asset management. This information can be found on the Multifamily business section of Fannie Mae's website.
     
  • Information on Fannie Mae's business model, including how it finances credits, is described in the Fannie Mae Multifamily Credit Risk Management presentation (PDF) under the section "Multifamily Business Overview".
  • See Article 9.1 above, which describes the criteria used by Fannie Mae when purchasing mortgage loans from third-parties.

* PLEASE NOTE: References to third-parties, are provided for information only; Fannie Mae does not specifically endorse any third-parties or their products/services. Fannie Mae is not responsible for the content or accuracy of external third-party websites.