Enhanced Disclosures for Fannie Majors

Transcription

1 April 2009, Vol. 4, No.2 Updating the Investment Community on Fannie Mae Mortgage Products and Programs Enhanced Disclosures for Fannie Majors Beginning March 1, 2009, enhanced disclosure documentation for Fannie Majors provides investors with more timely and readily available pool-level information about these securities and the collateral that backs them. Introduction Both investors and mortgage lenders have appreciated the beneficial aspects of Fannie Majors since 1986, when Fannie Mae first began issuing these securities. Fixed-income market participants value the pool issuance sizes and potentially diversified pool characteristics facilitated by the Fannie Majors program. Investors can purchase Fannie Majors in the TBA market or in the specified pool market, as they do any Fannie Mae mortgage-backed security (MBS). Beginning March 1, 2009, enhanced disclosure documentation for Fannie Majors provides investors with more timely and readily available pool-level information about these securities and the collateral that backs them on a real-time basis. We believe this will further contribute to the liquidity of Fannie Majors pools. This edition of MBSenger reviews how Fannie Majors are created and describes the enhanced disclosures for these securities now available to investors. An addendum to this MBSenger discusses the Federal Housing Finance Agency s (FHFA) 2009 loan limits which were revised pursuant to the American Recovery and Reinvestment Act of 2009 (ARRA). Description of Fannie Majors Pools Fannie Majors are an identifiable type of Fannie Mae MBS pools. Multiple lenders generally contribute the loans that back Fannie Majors. Fannie Majors are available for groups of amortizing fixed-rate (10-, 15-, 20-, 30- and 40-year) mortgages, 7-year balloons, certain adjustablerate mortgages and interest-only mortgages. Each Fannie Majors pool is comprised of a single mortgage type, identified by prefix. The securities include loans originated within one year of the pool s issue date. Fannie Majors can be identified by their pool numbers as shown in Exhibit 1. Exhibit 1: Pool Number Blocks for Fannie Majors Previously Issued Majors Pool Series Numbers Current Major Pool Series Numbers MA0000-MA9999 MC0000-MC9999 (Majors Pools backed by Community Reinvestment Act (CRA) loans these contain high concentrations of loans with household income levels that meet the low- and moderateincome definitions of CRA and can potentially help originators and investors seeking to purchase a CRA-targeted investment) Beneficial Characteristics of Fannie Majors for Investors We have found in discussions with investors that while many market participants are familiar with the benefits of Fannie Mae s large-sized Mega securities, some are less knowledgeable about the characteristics of Fannie Majors. Fannie Majors are generally larger-sized pools, have 2009 Fannie Mae. Trademarks of Fannie Mae. 1

2 potentially more geographically diversified collateral than non-fannie Majors pools and typically contain mortgage loans delivered to Fannie Mae by multiple lenders. 1 Many investors appreciate the considerable issuance size of Fannie Majors. Fannie Majors pool sizes often exceed $200 million at-issuance and between April 2008 and March 2009, seven Fannie Majors have exceeded $1 billion at issuance. Because lenders from all over the United States can participate each month in creating a single Fannie Majors issue, these securities are potentially advantageous for investors seeking this type of diversity from an MBS. When analyzing prepayment performance, investors can consider the geographic diversity of such pools. In addition, mortgage lenders derive value by securitizing loans through Fannie Majors pools. Fannie Majors allow mortgage lenders to receive the liquidity benefits afforded by MBS execution even if they do not have the volume of a specific loan type in a specific month necessary to meet the minimum pool size requirements for Fannie Mae fixed-rate single-issuer MBS. The minimum piece size lenders can deliver into Fannie Majors is $1,000. Fannie Majors Issuance Volume During the 12 months ending March 31, 2009, Fannie Mae issued $43 billion in Fannie Majors. Of this total amount, almost all were fixed-rate MBS securities. Creation of ARM Majors was a modest $15 million, as fixed-rate mortgages dominated origination in the primary mortgage market during this time period. Exhibit 2 provides details of monthly Fannie Majors issuance from April 2008 to March How are Fannie Majors Created Majors are created based on demand by Fannie Mae s mortgage lender customers and pool numbers are generally posted several months prior to settlement. Fannie Majors pool numbers are typically posted in advance for current production coupon 30-year, 15-year, 20-year and 10-year fixed-rate mortgages. Fannie Mae often simultaneously creates other pool numbers based on lender requests for Fannie Majors backed by loans with other terms and characteristics such as 7-year balloons, 40-year fixed rate or adjustable-rate mortgages. Beginning on the day the Fannie Majors pool numbers are assigned, lenders are able to deliver loans into those specific Majors pools on any given business day until the sixth business day prior to the end of the specific pool s settlement month. Lenders determine the settlement date(s) for amounts proportionate to their aggregate contribution of individual mortgages to a Majors pool. Lenders can transact an individual piece of a Fannie Majors upon settlement of that piece. Settlement can occur on any business day in the month of issuance. Most often, lenders choose to settle on the designated SIFMA settlement dates for the appropriate class of security. The first day of each month is the official issue date for all Fannie Majors securities settling in that month. Investors can track the aggregate outstanding balance updated on currently open Majors pools on by clicking Mortgage-Backed Securities, then Monthly Reporting Data, then MBS and then Fannie Majors. After choosing the desired product type from the page, the current aggregate outstanding balance for open pools is dis- Exhibit 2: Fanie Mae Majors Issuance (April 2008 through March 2009) $ billions Apr 08 May 08 Jun 08 Jul 08 Aug 08 Sep 08 Oct 08 Nov 08 Dec 08 Jan 09 Feb 09 Mar 09 Total 30-year fixed-rate by coupon 4.0% $0.054 $0.843 $0.728 $ % $0.012 $0.016 $0.005 $0.001 $0.001 $0.001 $0.002 $0.002 $0.004 $0.366 $0.613 $1.539 $ % $0.285 $0.274 $0.172 $0.129 $0.072 $0.043 $0.118 $0.094 $0.074 $0.429 $0.459 $0.447 $ % $0.649 $0.845 $0.996 $1.776 $0.985 $0.788 $0.819 $0.474 $0.462 $0.198 $0.099 $0.051 $ % $0.485 $0.399 $0.486 $0.824 $1.489 $1.916 $1.000 $0.232 $0.151 $0.043 $0.048 $0.020 $7.1 Other coupons total $0.237 $0.216 $0.173 $0.155 $0.361 $0.515 $0.234 $0.149 $0.095 $0.054 $0.032 $0.015 $ year fixed-rate total $1.7 $1.8 $1.8 $2.9 $2.9 $3.3 $2.2 $1.0 $0.8 $1.1 $2.1 $2.8 $24.3 Other than 30-year fixed-rate total $2.409 $2.847 $2.041 $1.135 $1.165 $0.998 $0.918 $0.655 $0.642 $0.463 $1.691 $3.406 $18.4 Fixed-rate total $4.1 $4.6 $3.9 $4.0 $4.1 $4.3 $3.1 $1.6 $1.4 $1.6 $3.8 $6.2 $42.6 ARMs total $0.000 $0.000 $0.003 $0.006 $0.005 $0.002 $0.000 $0.000 $0.000 $0.000 $0.000 $0.000 $0.015 TOTAL $4.1 $4.6 $3.9 $4.0 $4.1 $4.3 $3.1 $1.6 $1.4 $1.6 $3.8 $6.2 $ However, some Fannie Majors pools contain loans from a single lender. MBSenger April

3 Exhibit 3: Fannie Mae 30-Year Fixed-Rate Majors (last pool added: 04/21/2009) DAILY DAILY DAILY APRIL APRIL AGGREGATE MAY MAY AGGREGATE JUNE JUNE AGGREGATE POOL CUSIP BALANCE POOL CUSIP BALANCE POOL CUSIP BALANCE 3.5% MA YC88 12,790, % MA YCN5 149,410, MA YC54 4.5% MA YCB1 465,314, MA YC62 5.0% MA YCC9 83,720, MA YC70 5.5% MA YCR6 26,412, % MA YCS4 12,006, % MA YCT2 7,365, % 7.5% For more information, call the Capital Markets Sales Desk at The aggregate balance of a Majors pool disclosed in the Daily Aggregate Balance column represents the aggregate balance of all outstanding Fannie Mae mortgage-backed securities for a Majors pool that have settled from the issue date through the close of business on the most recent business day. Because some of the related mortgage-backed securities may not yet be issued and outstanding, the aggregate securities balance for a Majors pool may be less than the aggregate balance of the mortgage loans in the related loan pool. played by pool number and CUSIP. This information is updated daily at approximately 8:00 a.m. Exhibit 3 shows the data as displayed for 30-year fixed-rate Majors as of April 21, This information is also available for 30-year fixed-rate Majors and other Majors via Bloomberg by typing FNM <go> Fannie Mae Product Info <go> MBS <go> then select the Majors pools product type, for example, 30-year fixed-rate program. For Fannie Majors issued before March 1, 2009, investors have been able to gain access to pool information via PoolTalk, Bloomberg and the prospectus supplement for each new Majors pool on the third to last business day prior to the end of the month of issuance. Fannie Majors and High-Balance Loans 2 Delivery of high-balance loans into TBA-eligible Fannie Majors pools is permitted. However, as with other non-standard pool characteristics (such as relocation loans, cooperative properties and significant buydowns), the ten percent de minimis restriction, as proscribed by the American Securitization Forum, will be applied to each discrete lender delivery (settlement) into a given Fannie Majors pool, rather than at the pool level. High-balance loans can be pooled for Fannie Majors pools with appropriate non-tbaeligible prefixes as well, including CJ, CK, NJ, JI and JL prefixes for fixed-rate MBS and LD prefix for ARM MBS. There are no such de minimis restrictions on non-tba-eligible pools. Effective May 1, 2009, Fannie Mae will accept for delivery loans originated in 2009 using revised loan limits set by FHFA pursuant to the American Recovery and Reinvestment Act of A description of these new loan limits is contained in the addendum to this MBSenger. Description of Enhanced Majors Disclosures Beginning with March 1, 2009 issuance, Fannie Mae began providing market participants with enhanced pool-level disclosure documentation, including interim prospectus supplements for Fannie Majors on a daily rolling basis as pieces of Majors pools close throughout the month. The interim prospectus supplement will contain cumulative data to date for each pool. The final prospectus supplement for each security will be available on the second business day prior to the end of the month of issuance. These enhancements provide investors with a more clear and timely summary of the characteristics of loans backing Fannie Majors. Before this enhanced disclosure was implemented, market participants had expressed that they would value having more frequent updates about the pool characteristics of Fannie Majors before the pools were closed. 2 A high-balance loan is a loan with an unpaid principal balance (UPB) at origination greater than the general loan limit and up to the high-cost limits set by FHFA pursuant to the American Recovery and Reinvestment Act (ARRA). For one-unit single-family loans in the continental U.S. a high-cost loan would be a loan whose origination UPB is between $417,000 and $729,750. MBSenger April

4 Both the interim prospectus supplement and the final prospectus supplement will provide information useful to investors including: UPB Issue Date Pool Prefix and Pool Number Coupon CUSIP Servicer Number of mortgage loans Average loan size Maturity date Weighted average coupon rate Weighted average loan age Weighted average loan term Weighted average remaining maturity Weighted average LTV Weighted average credit score % UPB without credit score % UPB with interest only first distribution. % UPB with third party origination Exhibit 4: Sample Interim Prospectus Supplement Issued as of March 26, 2009 for Pool Number MA0042 Interim Supplement to Prospectus referenced in the pool statistics included herein The information in this interim prospectus supplement is preliminary and subject to revision in subsequent interim prospectus supplements and the final prospectus supplement. Guaranteed Mortgage Pass-Through Certificates (Residential Mortgage Loans) THE CERTIFICATES AND PAYMENTS OF PRINCIPAL AND INTEREST ON THE CERTIFICATES ARE NOT GUARANTEED BY THE UNITED STATES, AND DO NOT CONSTITUTE A DEBT OR OBLIGATION OF THE UNITED STATES OR ANY OF ITS AGENCIES OR INSTRUMENTALITIES OTHER THAN FANNIE MAE. We will issue and guarantee the certificates. Each certificate represents an undivided ownership interest in a pool of residential mortgage loans. We offer each certificate by this interim prospectus supplement, the prospectus supplement, and the prospectus referenced in the pool statistics included herein. The pool number in the pool statistics of this interim prospectus supplement identifies the pool of residential mortgage loans to which the certificates relate. The certificates are issued under the terms of the Single-Family Master Trust Agreement dated as of June 1, We have executed the trust agreement in our corporate capacity and as Trustee. An interim issue supplement that supplements the trust agreement will be created. It will have the same date as the issue date shown in the pool statistics of this interim prospectus supplement. We have responsibility for the servicing of the mortgage loans in the pool. Every month we will pay to the certificateholders scheduled installments of principal on the mortgage loans in the pool, together with interest at the pass-through rate. We guarantee to pay these amounts, whether or not the borrowers under the mortgage loans pay us. If we foreclose on a mortgage loan, we also must pay certificateholders the full principal balance of that loan even if we recover a lesser amount. Before you decide to invest in the certificates, carefully read the prospectus, especially the "risk factors" section. If you cannot understand, evaluate and bear those risks, you should not invest in the certificates. We are not required to register the certificates under the Securities Act of 1933, as amended, and therefore have not filed a registration statement with the U.S. Securities and Exchange Commission. The certificates are exempted securities within the meaning of the Securities Exchange Act of 1934, as amended. Settlement is expected to occur no later than the last business day of the month on which the issue date occurs. The pool statistics of this interim prospectus supplement contain statistical information about the pool, including a prefix to the pool number that identifies the specific type of mortgage loan in the pool. This interim prospectus supplement does not contain complete information regarding this offering and should be read only in conjunction with the prospectus supplement and the prospectus referenced in the pool statistics included herein. MBSenger April

5 The information, including the principal balances, loan, count and any pool statistical information in this Interim Prospectus Supplement is preliminary and is subject to revision throughout the month as additional loans are delivered into this pool. FANNIE MAE MORTGAGE-BACKED SECURITIES PROGRAM SUPPLEMENT TO PROSPECTUS DATED JANUARY 01, 2009 $641,774, ISSUE DATE MARCH 01, 2009 SECURITY DESCRIPTION FNMS CL-MA PERCENT PASS-THROUGH RATE FANNIE MAE POOL NUMBER CL-MA0042 CUSIP 31417YBL0 PRINCIPAL AND INTEREST PAYABLE ON THE 25 TH OF EACH MONTH BEGINNING APRIL 25, 2009 POOL STATISTICS SELLER MULTIPLE SERVICER MULTIPLE NUMBER OF MORTGAGE LOANS 2503 AVERAGE LOAN SIZE $256, MATURITY DATE 04/01/2039 WEIGHTED AVERAGE COUPON RATE % WEIGHTED AVERAGE LOAN AGE 0 mo WEIGHTED AVERAGE LOAN TERM 359 mo WEIGHTED AVERAGE REMAINING MATURITY 359 mo WEIGHTED AVERAGE LTV 66% WEIGHTED AVERAGE CLTV 68% WEIGHTED AVERAGE CREDIT SCORE 767 % UPB WITHOUT CREDIT SCORE 0.02% % UPB WITH INTEREST ONLY FIRST DISTRIBUTION 5.98% % UPB WITH THIRD PARTY ORIGINATION 24.92% The information, including the principal balances, loan, count and any pool statistical information in this Interim Prospectus Supplement is preliminary and is subject to revision throughout the month as additional loans are delivered into this pool. FANNIE MAE MORTGAGE-BACKED SECURITIES PROGRAM SUPPLEMENT TO PROSPECTUS DATED JANUARY 01, 2009 FANNIE MAE POOL NUMBER CL-MA0042 QUARTILE DISTRIBUTION LOANS WHERE INTEREST RATE HAS BEEN BOUGHT DOWN PURSUANT TO AN INTEREST RATE BUYDOWN PLAN BY MORE THAN 2% OR FOR MORE THAN 2 YEARS. Loan Size Coupon Rate LTV Credit Score MAX $731, MAX MAX 97 MAX % 383, % % 79 75% 793 MED 292, MED MED 70 MED % 216, % % 56 25% 747 MIN 34, MIN MIN 13 MIN 591 THE DATE OF THIS INTERIM PROSPECTUS SUPPLEMENT IS MARCH 26, 2009 Loan Term (# Of Months) Loan Age (# Of Months) Remaining Maturity (# Of Months) MAX 360 MAX 2 MAX % % 0 75% 360 MED 360 MED 0 MED % % 0 25% 360 MIN 300 MIN -1 MIN 299 LOAN PURPOSE Type # Of Loans % Of UPB Aggregate UPB PURCHASE $77,171, REFINANCE ,602, PROPERTY TYPE # Of Units # Of Loans % Of UPB Aggregate UPB $637,925, ,849, OCCUPANCY TYPE Type # Of Loans % Of UPB Aggregate UPB PRINCIPAL RESIDENCE $616,299, SECOND HOME ,436, INVESTOR ,038, THE DATE OF THIS INTERIM PROSPECTUS SUPPLEMENT IS MARCH 26, 2009 MBSenger April

6 The information, including the principal balances, loan, count and any pool statistical information in this Interim Prospectus Supplement is preliminary and is subject to revision throughout the month as additional loans are delivered into this pool. FANNIE MAE MORTGAGE-BACKED SECURITIES PROGRAM SUPPLEMENT TO PROSPECTUS DATED JANUARY 01, 2009 FANNIE MAE POOL NUMBER CL-MA0042 Year # Of Loans % Of UPB ORIGINATION YEAR Aggregate UPB Year # Of Loans % Of UPB Aggregate UPB $639,219, $2,554, GEOGRAPHIC DISTRIBUTION State # Of Loans % Of UPB Aggregate UPB State # Of Loans % Of UPB Aggregate UPB ALABAMA $39,156, MONTANA $2,842, ARIZONA ,400, NEBRASKA , ARKANSAS , NEVADA ,576, CALIFORNIA ,644, NEW HAMPSHIRE ,208, COLORADO ,743, NEW JERSEY ,654, CONNECTICUT ,855, NEW MEXICO ,985, DELAWARE ,554, NEW YORK ,829, DISTRICT OF ,906, NORTH ,245, COLUMBIA CAROLINA FLORIDA ,993, NORTH DAKOTA , GEORGIA ,262, OHIO ,546, HAWAII ,174, OKLAHOMA ,269, IDAHO ,304, OREGON ,793, ILLINOIS ,023, PENNSYLVANIA ,582, INDIANA ,149, RHODE ISLAND , IOWA ,175, SOUTH ,607, CAROLINA KANSAS , SOUTH DAKOTA , KENTUCKY ,882, TENNESSEE ,763, LOUISIANA ,399, TEXAS ,937, MAINE , UTAH ,357, MARYLAND ,102, VERMONT , MASSACHUSETTS ,681, VIRGINIA ,168, MICHIGAN ,403, WASHINGTON ,238, MINNESOTA ,494, WEST VIRGINIA , MISSISSIPPI ,757, WISCONSIN ,755, MISSOURI ,766, WYOMING , The information, including the principal balances, loan, count and any pool statistical information in this Interim Prospectus Supplement is preliminary and is subject to revision throughout the month as additional loans are delivered into this pool. FANNIE MAE MORTGAGE-BACKED SECURITIES PROGRAM SUPPLEMENT TO PROSPECTUS DATED JANUARY 01, 2009 FANNIE MAE POOL NUMBER CL-MA0042 SERVICER Servicer Name # Of Loans % Of UPB Aggregate UPB GOLF SAVINGS BANK $51,391, HOMESTREET BANK ,902, EVERBANK ,143, METLIFE BANK, NA ,031, NATIONAL CITY BANK ,892, WELLS FARGO BANK, N.A ,482, GUARANTY BANK F.S.B ,880, REMAINING ,049, ORIGINATION TYPE THE DATE OF THIS INTERIM PROSPECTUS SUPPLEMENT IS MARCH 26, 2009 Type # Of Loans % Of UPB Aggregate UPB BROKER $99,512, CORRESPONDENT ,386, RETAIL ,875, THE DATE OF THIS INTERIM PROSPECTUS SUPPLEMENT IS MARCH 26, 2009 MBSenger April

7 A daily updated interim prospectus will only be provided if the Majors pool has changed since the previous interim prospectus. The interim and final prospectus supplements can be found on our Website at Backed+Securities by searching our Quick Securities Locator for the desired pool number. One thing that will not change is that as in the past, investors will still be able to track aggregate information, updated daily, on currently open Majors pools on fanniemae.com as lenders submit their individual pieces of a Majors pool during the month. PoolTalk will not be modified to accommodate daily Majors disclosures. PoolTalk will continue to publish issuance data for Fannie Majors two business days prior to month end. It is important to note that interim prospectus supplements are not available for CRA Majors. Summary Fannie Mae has responded to investor requests for more timely disclosures about the mortgage loans that back Fannie Majors. Beginning March 1, 2009, Fannie Mae began providing investors with enhanced disclosures for Fannie Majors including interim prospectus supplements. These interim prospectus supplements provide useful intra-month aggregate information about loans backing Fannie Majors pools. In this edition of MBSenger we provided detailed information about these enhanced disclosures and how investors can access the information. We also reviewed the process by which Fannie Majors are created and discussed the beneficial aspects of these securities including their generally larger pool sizes and the potentially geographically diverse loans that back these securities. MBSenger April

8 Addendum Over the past year, three separate federal laws have been passed that impact Fannie Mae s allowable loan limits: Economic Stimulus Act of 2008 (ESA) established temporary high cost area loan limits applicable only to loans closed between 7/1/2007 and 12/31/2008, using a formula defined as 125% of the area median home price, up to maximum ceiling of 175% of the general loan limit (i.e. $729,750 for a 1-unit property in the continental US) Housing and Economic Recovery Act of 2008 (HERA) established permanent high cost area loan limit authority under Fannie Mae s charter, irrespective of loan closing date, using a formula defined as 115% of the median home price, up to a maximum limit of 150% of the general loan limit (i.e. $625,500 for a 1-unit property in the continental US). American Recovery and Reinvestment Act of 2009 (ARRA) established for loans closed during 2009, the loan limit is defined as the higher of the 2008 limits and those originally published for 2009 pursuant to HERA. On February 23, 2009, the Federal Housing Finance Agency (FHFA) issued revised 2009 high-cost area loan limits pursuant to the American Recovery and Reinvestment Act (ARRA). Fannie Mae has announced that lenders may begin delivering loans using these higher temporary limits (up to a maximum of $729,750 for a 1-unit dwelling in the contintental US), effective May 1, 2009 It is important to note that specific loan limits apply at the county level, and the limit may be lower for each specific high-cost area. High-Balance Loan Eligibility In conjunction with the revised loan limit changes, Fannie Mae reevaluated the high-balance loan eligibility guidelines and established several changes that include the following: Revised loan-to-value ratios for certain loan types; New minimum credit score requirements; Elimination of cash-out refinances on 2- to 4- unit homes; and, Additional appraisal requirements. For more details on these changes and additional changes made in regards to high-balance loan eligibility, please refer to Announcement Temporary High-Cost Area Loan Limits and Revised Eligibility Requirements for High-Balance Mortgage Loans, available on Fannie Mae s Web site 3. For MBS deliveries, loans up to the temporary highcost limits are eligible for TBA pooling according to the ten percent de minimis limits currently in place for high-balance loans 4. MBSenger is published by Fannie Mae s Fixed-Income Securities Marketing Group Fannie Mae Fixed-Income Securities Investor Helpline (800) John The Losen Editor Vice President, Fixed-Income Securities Marketing Kyle Lynch Director, Fixed-Income Securities Marketing kyle_lynch@fanniemae.com All rights reserved The American Securitization Forum announced that loans originated with the temporary high-cost area loan limits constitute good delivery in the TBA market for MBS. Each TBA MBS pool may contain up to ten percent of the aggregate issue date unpaid principal balance in high-balance loans, including those with these higher temporary loan limits for MBSenger April