Resources for UK Investors (CAS)

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 Connecticut Avenue Securities® (CAS) 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. 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 Credit Risk Management presentation (PDF) under the sections “Who we do business with”, “What we buy”, and “How we manage performance”.
     
  • 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 and Preliminary Offering Memorandum available through the Transactions page.
     
  • Fannie Mae conducts ongoing quality control reviews on a statistical random sample of the mortgage loans it acquires. Results of these reviews are published in the “Results of Fannie Mae Quality Control” section of the relevant Offering Memorandum and Preliminary Offering Memorandum available through the Transactions page.
     
  • In addition to its own internal quality control reviews and processes, Fannie Mae’s process includes engaging third-party due diligence providers* to conduct additional due diligence reviews for a portion of the loans that Fannie Mae acquires. This information is described on the Due Diligence page. Each quarter, Fannie Mae publishes the ongoing results of the third-party due diligence reviews (PDF), along with deal-level due diligence reporting (linked within the ongoing results (PDF)).
     
  • Fannie Mae publishes comprehensive guidelines and resources for lenders and servicers on topics such as loan products and quality management. This information can be found on the Single-Family 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 Credit Risk Management presentation (PDF) under the section “Our single-family business and strategy”.


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

  • To align Fannie Mae’s interest with that of investors, Fannie Mae will retain at least 5% of the nominal value of each offered tranche in the way described in Article 6.3(a). 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®.
     
  • Alternatively, Fannie Mae provides loan-level issuance data and ongoing monthly performance data through Data Dynamics. In order to help UK Institutional Investors reconcile the CAS download files with the applicable UK standards, Fannie Mae provides a file that maps the CAS data fields and CAS investor report information to the disclosure template for residential real estate (Annex 2) the UK’s onshored Commission Delegated Regulation (EU) 2020/1224 (available here). Download Fannie Mae – CAS 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 and Preliminary Offering Memorandum available through the Transactions page.
     
  • Deal structure characteristics associated with sample past issuances are discussed in the CAS Investor Presentation (PDF)4. Similar information is contained in the Deal Presentation for each CAS transaction in advance of the transaction, available for viewing during the marketing period through Deal Roadshow5. Contact your dealer for the access code.
     
  • For relevant transactions, investors can also refer to sector research and ratings reports published by rating agencies. Rating agencies that have previously rated CAS issuances include DBRS; FitchRatings; Kroll Bond Rating Agency; Moody’s; Morningstar Ratings; and S&P Global Ratings.* A summary of ratings upgrades is contained in the CAS Investor Presentation (PDF).
     
  • Tables showing the sensitivity of note yields to parameters such as prepayments, credit events, or write-down amounts are presented in the “Prepayment and Yield Considerations” sections of the relevant Offering Memorandum and Preliminary Offering Memorandum available through the Transactions page.

Katten – this presentation refers to the Resources for EU investors website. Ideally this would also reference the duplicate website for UK investors.

Katten – document is behind a login screen which we could not access.


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 through Data Dynamics (which allows for custom downloads).
     
  • Data Dynamics allows investors to analyze and compare specific CAS deal loan profiles and performance, as well as analyze historical performance data and conduct historical comparative analyses.
     
  • Risk characteristics of the underlying reference pools for sample past issuances are discussed in the CAS Investor Presentation (PDF). Similar information is contained in the Deal Presentation for each CAS transaction in advance of the transaction, available for viewing during the marketing period through Deal Roadshow. Contact your dealer for the access code.
     
  • For relevant transactions, investors can also refer to sector research and ratings reports published by rating agencies. Rating agencies that have previously rated CAS issuances include DBRS; FitchRatings; Kroll Bond Rating Agency; Moody’s; Morningstar Ratings; and S&P Global Ratings.* A summary of ratings upgrades is contained in the CAS Investor Presentation (PDF).


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

  • The specific structure of each CAS 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 and Preliminary Offering Memorandum available through the Transactions page. There are no liquidity enhancements or market value triggers in CAS transactions.
     
  • In advance of each transaction, key structural features of each deal are described in the Deal Presentation, available for viewing through Deal Roadshow (contact your dealer for the access code), and in the Term Sheet and Preliminary Offering Memorandum, made available to prospective investors by the underwriting syndicate prior to pricing. (The CAS Investor Presentation (PDF) contains the type of information generally found in the Deal Presentation. 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.
     
  • For relevant transactions, investors can also refer to sector research and ratings reports published by rating agencies. Rating agencies that have previously rated CAS issuances include DBRS; FitchRatings; Kroll Bond Rating Agency; Moody’s; Morningstar Ratings; and S&P Global Ratings.*

Article 5.4(a) – Monitoring parameters

  • For each transaction, Fannie Mae provides loan-level issuance data and ongoing monthly performance data through Data Dynamics (which allows for custom downloads). Such data includes, but is not limited to, the percentage of loans more than 30, 60 and 90 days past due, default rates, prepayment rates, loans in foreclosure, recovery rates, repurchases, loan modifications, collateral type, periodically updated credit scores, geographical diversification, and loan-to-value ratios. Data Dynamics also allows investors to analyze historical performance data and conduct historical comparative analyses.


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, Andrew Davidson & Co., Blackrock, CoreLogic RiskModel, Locus, Milliman, Black Knight, and Intex.*
     
  • Many broker-dealers also make ongoing secondary markets in Fannie Mae’s CAS securities and are able to assist investors with modeling and analytic needs. A number of broker-dealers provide ongoing research and analysis on CAS deal performance.
     
  • Data Dynamics provides insights into historical loan performance trends and relationships to credit performance, as well as potential deal performance by comparing deals across various historical outcomes.
     
  • Fannie Mae publishes extensive historical loan performance data sets in order to help investors and other parties model the performance of Fannie Mae loans, along with tutorials on how to analyze the available data.
     
  • Tables showing the sensitivity of note yields to parameters such as prepayments, credit events, or write-down amounts are presented in the “Prepayment and Yield Considerations” sections of the relevant Offering Memorandum and initially in the Preliminary 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 way described in Article 6.3(a). 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.
  • Fannie Mae selects loans to be included in reference pools for credit risk transfer transactions according to clearly established criteria, and distributes such loans between CAS and other credit risk transfer transactions on a random basis.
     
  • Fannie Mae describes how it selects loans to be included in reference pools for credit risk transfers in the CAS Investor Presentation under “CAS Reference Pool Features” and slides showing the reference pool selection process.
     
  • For specific deals, information about the reference pool selection criteria is included in the relevant Offering Memorandum and Preliminary 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

  • 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.
     
  • Alternatively, Fannie Mae provides loan-level issuance data and ongoing monthly performance data through Data Dynamics. In order to help UK Institutional Investors reconcile the CAS download files with the applicable UK standards, Fannie Mae provides a file that maps the CAS data fields and CAS investor report information to the disclosure template for residential real estate (Annex 2) and investor report template (Annex 12) of the UK’s onshored Commission Delegated Regulation (EU) 2020/1224 (available here). Download Fannie Mae – CAS 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, 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, term sheet, indenture, trust agreement, capital administration agreement, and capital contribution agreement 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 CAS 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, 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, term sheet, indenture, trust agreement, capital administration agreement, and capital contribution agreement are made available shortly after a transaction closes. These documents are available through the Transactions page.
     
  • During marketing and prior to pricing, a Deal Presentation is available for viewing through Deal Roadshow. Contact your dealer for the access code.
     
  • General information about the program and deal structures are described in the CAS Investor Presentation (PDF).


Article 7.1(e) – Investor reports

  • CAS investor reports are available on a monthly basis via CTS link. In order to help UK Institutional Investors reconcile the CAS download files with the applicable UK standards, Fannie Mae provides a file that maps CAS investor report information to the draft investor report template (Annex 12) of the UK’s onshored Commission Delegated Regulation (EU) 2020/1224 (available here). Download Fannie Mae – CAS 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, available on the Transactions page, Fannie Mae will provide notice about specific events such as material breaches and certain amendments to transaction documents, and events potentially impacting the performance of the securities will be communicated to investors. Fannie Mae provides such information on 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 CAS 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. 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 Credit Risk Management presentation (PDF) under the sections “Who we do business with”, “What we buy”, and “How we manage performance”.
     
  • 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 and Preliminary Offering Memorandum available through the Transactions page.
     
  • Fannie Mae conducts ongoing quality control reviews on a statistical random sample of the mortgage loans it acquires. Results of these reviews are published in the “Results of Fannie Mae Quality Control” section of the relevant Offering Memorandum and Preliminary Offering Memorandum available through the Transactions page.
     
  • In addition to its own internal quality control reviews and processes, Fannie Mae’s process includes engaging third-party due diligence providers* to conduct additional due diligence reviews for a portion of the loans that Fannie Mae acquires. This information is described on the Due Diligence page. Each quarter, Fannie Mae publishes the ongoing results of the third-party due diligence reviews (PDF), along with deal-level due diligence reporting (linked within the ongoing results (PDF)).
     
  • Fannie Mae publishes comprehensive guidelines and resources for lenders and servicers on topics such as loan products and quality management. This information can be found on the Single-Family 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 Credit Risk Management presentation (PDF) under the section “Our single-family business and strategy”.
  • Exposures being securitized are not UK mortgages, so this provision may not be applicable.
     
  • Nonetheless, Fannie Mae requires lenders to verify all income, assets, and employment necessary to qualify for the mortgage loan. Lenders are required to ensure accuracy of data submitted to Fannie Mae, to apply due diligence when reviewing documentation in the loan file, and to take other actions to ensure prudent underwriting.
     
  • More information about underwriting is described in the Fannie Mae Credit Risk Management presentation (PDF).

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, including rating agencies and vendors, 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.