Connecticut Avenue Securities

Connecticut Avenue Securities (CAS) is the benchmark for U.S. mortgage credit.

$1.49T of unpaid principal balance of single-family mortgage loans is partially covered through CAS transactions, measured at the time of the transactions, as of Q3 2020.

As the largest manager of residential mortgage credit, Fannie Mae sets the standard for managing credit risk throughout the life cycle of a mortgage – continuously innovating to reduce default risk and credit losses.

Through Connecticut Avenue Securities® (CAS), institutional investors can invest side-by-side with Fannie Mae in our geographically diverse credit book of business. The CAS program provides an opportunity to invest in a portion of the credit risk that Fannie Mae retains when we guarantee single-family mortgage-backed securities (MBS).

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Connecticut Avenue Securities Investor Presentation Slide

A broad and deep market

Since our first CAS issuance in 2013, Fannie Mae has developed the most liquid market for single-family mortgage credit risk. Our offering of industry-leading tools and capabilities have helped to build a broad and diverse investor base. To allow institutional investors to evaluate the program, we provide:

A vast amount of performance information in our historical research dataset
Transparency into our innovative tools and processes
Data Dynamics®, a free proprietary tool that enables investors to analyze:
- Fannie Mae's historical research data
- CAS deal profiles and performance
- Monthly loan-level reference pool data

A geographically diverse pool

Underlying reference pools are large and highly diversified, offering broad exposure to the U.S. housing market. Loans are:

Conventional 30-year fixed-rate mortgage loans recently securitized into Fannie Mae MBS
Originated to meet Fannie Mae's rigorous underwriting and eligibility criteria
Managed with our innovative quality control process – we provide ongoing credit risk management oversight throughout the life of each loan

The CAS REMIC

In 2018, Fannie Mae introduced the industry's award-winning CAS REMIC®, further broadening the investor base. Benchmark CAS deals from 2018-R07 forward are known as CAS REMICs and are issued by a bankruptcy remote trust. Transactions prior to CAS 2018-R07, known as the "C" series (e.g., CAS 2018-C06), are unguaranteed and unsecured debt securities. Unlike standard Fannie Mae debt, CAS investors in the "C" series may bear losses if loans in the reference pools experience losses.

CAS REMIC benefits

Retains key features of the CAS program to support consistency.
Structured similarly to a typical residential mortgage-backed securitization.
For more details, view the investor presentation.

Fannie Mae retains a vertical slice of each CAS REMIC transaction to ensure aligned interest with investors.

In April 2018, SIFMA's TBA Guideline Steering Committee confirmed via a vote that it has not identified any issues that would impair the TBA eligibility of MBS under this new structure.

As a result, Fannie Mae released an updated Single-Family MBS Prospectus, effective for fixed-rate and adjustable-rate mortgage single-family pools with issue dates on or after May 1, 2018. These pools are issued under our Amended and Restated 2016 Single-Family Master Trust Agreement.

Seasoned loan transactions

As part of our ongoing capital management efforts, Fannie Mae began taking credit risk transfer actions on its existing guaranty book.

Refi Plus/HARP

Fannie Mae's Refi Plus program ran from April 2009 to December 2018 and was designed to enable borrowers whose loans were already owned by Fannie Mae to efficiently refinance into improved loan terms such as a lower rate, a shorter term, or a more stable product.

Home Affordable Refinance Program® (HARP®) loans are the subset of Refi Plus loans that had LTVs greater than 80 percent. Borrowers that took advantage of the HARP program demonstrated continued ability and willingness to make their mortgage payments but were unable to refinance due to low or negative equity.

Relative to standard refinance products, the primary benefits of Refi Plus/HARP included:

Lower loan delivery fees charged by the GSEs to the lenders (aka, "Loan Level Price Adjustments", or LLPAs), that enabled participating lenders to pass-through those savings to borrowers.
Certain underwriting flexibilities, including the ability to exceed standard refinance LTV limits (HARP).
No requirement for new or additional mortgage insurance (MI) even if the refinanced loan amount exceeded 80% of the updated property value, which further reduced borrower costs related to the purchase of MI.

Fannie Mae introduced CAS 2019-HRP1, its first seasoned CAS credit linked note (CLN) deal, in November 2019, winning RMBS Deal of the Year from GlobalCapital.

Learn more through Fannie Mae's Refi Plus and HARP program commentary.

Seasoned B-Tranche

The Seasoned B-Tranche deals transfer risk on retained B-pieces from previous CAS deals. The securities offered reflect the collateral characteristics, class sizing, waterfall, and triggers of each underlying reference pool. Cash flows continue to be allocated pro rata across the original sold and original retained portions of the underlying B classes for each legacy CAS transaction.

CAS 2020-SBT1, Fannie Mae's inaugural Seasoned B-Tranche deal, transfers a portion of risk previously retained by Fannie Mae on eleven B classes from eight underlying CAS deals issued in late 2015 through 2016. The deal received an honorable mention for the North American Transaction of the Year by Structured Credit Investor.

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