Fannie to sell actual loss risk transfer notes

Author: Zoe Thomas | Published: 22 Jul 2015

Fannie Mae is preparing to follow its counterpart, Freddie Mac, and issue an actual loss absorbing risk transfer product. The deal could come as early as the fourth quarter of this year as demand for the new risk sharing bond takes off.

The government sponsored entity (GSE) is preparing to release loan level data as a first step to the sale.

To date, Freddie has done two of these synthetic transactions, in April and June of this year. The Structured Agency Credit Risk (STACR) notes are unsecured and unguaranteed. Returns are based on the collection of mortgage payments from newly acquired, single family home mortgages.

The structure allows the issuer to offset some of the risk by selling...