Fannie Mae Connecticut Avenue Securities Receive Upgraded NAIC Designations for the 2019 Filing Year

Matthew Classick
202-752-3662

WASHINGTON, DC – Fannie Mae (FNMA/OTCQB) announced today that all Connecticut Avenue Securities^® (CAS) deals issued as direct debt have received designations for the 2019 filing year from the National Association of Insurance Commissioners (NAIC). Four M-2 bonds were upgraded to an NAIC 1 designation and two M-2 bonds were upgraded to an NAIC 2 designation.

The following CAS bonds received upgraded NAIC Designations in the 2019 filing year.

M1 Classes

*Note: All NAIC 1 Designations were upgraded from an NAIC 2 Designation. The NAIC 2 Designations were upgraded from NAIC 3 Designations.

To see all NAIC Designations for the 2019 filing year, please view the NAIC Designations table on our website.

In late 2018, Fannie Mae implemented its CAS REMIC^® structure. CAS REMIC transactions are issued out of a bankruptcy remote trust, rather than as direct debt of Fannie Mae. The switch to issuance from a trust necessitated a review of the NAIC modeling process. In 2019 Fannie Mae requested that the NAIC Structured Securities Group (SSG) use the NAIC Approved Modeling Process to develop preliminary NAIC Designations and Breakpoints for a CAS REMIC transaction. Tranches of the CAS 2019-R02 issuance were used for this analysis. This was the first time the NAIC has applied its approved modeling process to a CAS REMIC transaction. Follow the link to view the letter and analysis. CAS 2019-R02 breakpoints for year-end 2019 are expected to be released later this month. 

The NAIC's Structured Securities Group (SSG) describes its designations on its webpage. An NAIC 1 designation is assigned to obligations exhibiting the highest quality and should be eligible for the most favorable treatment provided under the NAIC Financial Conditions Framework, while an NAIC 2 designation is assigned to obligations of high quality and should be eligible for relatively favorable treatment under the NAIC Financial Conditions Framework¹.

The National Association of Insurance Commissioners 2019 Mortgage Reference Securities Report is not a substitute for or functional equivalent of the credit ratings of rating agencies and is not produced to permit investors to compare the likelihood of default or of full and timely payment between one or more securities.

About Connecticut Avenue Securities
The amount of periodic principal and ultimate principal paid on CAS notes is determined by the performance of a large and diverse reference pool. For more information on individual CAS transactions and Fannie Mae's approach to credit risk transfer, visit our credit risk transfer website.

¹ The NAIC's SSG is responsible for the day-to-day credit quality assessment and valuation of securities owned by state regulated insurance companies. The Securities Valuation Office conducts credit analysis on these securities for the purpose of assigning an NAIC designation and/or unit price.