Followers | 69 |
Posts | 5631 |
Boards Moderated | 1 |
Alias Born | 02/03/2010 |
Tuesday, May 20, 2014 1:58:30 PM
Fannie Mae Tuesday cut the yields it plans to pay on its third and largest issue of such derivative debt securities, expected to price as soon as Tuesday afternoon. For the riskiest slice of the deal, Fannie Mae told investors it may sell the debt at 2.75 percentage points to 2.85 percentage points over 1-month Libor, down from levels discussed earlier this week at above 3 points, investors said.
Investors said one part of the deal drew 19 times the necessary demand. A Fannie Mae spokeswoman declined to comment.
The mortgage company sells the derivatives as part of a program to pass on to private investors part of the risk it takes by guaranteeing mortgage payments. Since last its first deal last fall, investors have increased their demand for the debt, seeking higher yielding bets in the mortgage bond market than standard mortgage-backed securities.
Fannie Mae's so-called "risk sharing" deal is made up of synthetic bonds whose value hinges on the performance of about $61 billion in mortgages acquired and guaranteed by the mortgage company, and sold into mortgage-backed securities.
The notes protect Fannie Mae from losses if delinquencies rise in the portfolio of loans.
For the first time, Fannie Mae is selling derivatives that protect it from defaults on loans it guarantees where 97% of a home's value was lent to the property's buyer. Of the mortgage loans tied to the derivatives, $14 billion have this 97% loan-to-value ratio. The rest of the deal is tied to loans where the ratio of debt to the property value is 80%, similar to Fannie Mae's first two risk-sharing offerings.
Losses are more likely on loans where buyers have made smaller down payments.
The offering helps Fannie Mae meet a mandate set by the Federal Housing Finance Agency to reduce the risks that taxpayers bear on loans guaranteed by the government-supported firm.
Melvin Watt, the new FHFA director, this month directed Fannie Mae and its competitor Freddie Mac FMCC +0.93% to offset its risks on $90 billion of loans this year, up from $30 billion in 2013.
Al Yoon at albert.yoon@wsj.com
Last Shot Hydration Drink Announced as Official Sponsor of Red River Athletic Conference • EQLB • Jun 20, 2024 2:38 PM
ATWEC Announces Major Acquisition and Lays Out Strategic Growth Plans • ATWT • Jun 20, 2024 7:09 AM
North Bay Resources Announces Composite Assays of 0.53 and 0.44 Troy Ounces per Ton Gold in Trenches B + C at Fran Gold, British Columbia • NBRI • Jun 18, 2024 9:18 AM
VAYK Assembling New Management Team for $64 Billion Domestic Market • VAYK • Jun 18, 2024 9:00 AM
Fifty 1 Labs, Inc Announces Acquisition of Drago Knives, LLC • CAFI • Jun 18, 2024 8:45 AM
Hydromer Announces Attainment of ISO 13485 Certification • HYDI • Jun 17, 2024 9:22 AM