WASHINGTON, D.C. — Fannie Mae today announced the introduction of Fannie Mae Guaranteed Multifamily Structures, or Fannie Mae GeMSTM, an expanded multifamily mortgage-backed securities (MBS) execution that will include DUS Megas, DUS REMICs and syndicated DUS Megas. Syndicated Mega deals will be managed by broker-dealers and offered in issuance sizes similar to DUS REMIC transactions. This expansion builds on Fannie Mae's successful DUS REMIC issuances, providing additional Fannie Mae GeMS products with similar features and liquidity. Fannie Mae's suite of multifamily MBS products helps to provide a continuous source of stable funding to support the nation's rental housing market.
Source: Fannie Mae
"Fannie Mae is a leading provider of capital and liquidity for affordable workforce rental housing, and our role is more important now than ever," said Kenneth J. Bacon, Executive Vice President, Multifamily Mortgage Business. "When many financial institutions pulled out of the multifamily financing market during the financial crisis, we stayed and increased our participation to help keep credit flowing."
"The introduction of Fannie Mae GeMS syndicated Mega offerings supports our commitment to provide transparency, consistency and liquidity to multifamily investors in the fixed-income markets," said Kimberly H. Johnson, Vice President, Capital Markets.
Fannie Mae GeMS securities expand the MBS products already offered within Fannie Mae's Multifamily DUS program. Fannie Mae revitalized its multifamily MBS program in 2009, increasing issuance and using the company's portfolio to enhance liquidity for multifamily MBS products.
In addition to $16.4 billion of DUS MBS, Fannie Mae also issued $4.8 billion of DUS structured securities in 2010. The structured products offerings continue to expand under the Fannie Mae GeMS umbrella. There were two Floater/Inverse Interest-Only REMIC structures issued in 2010, a first for Fannie Mae multifamily collateral. Other new structures are expected to join the roster of multifamily structured product offerings in 2011.
Syndicated DUS Megas and DUS REMIC structures are customized to meet investor demand, creating opportunities for participation in larger, regularly-issued deals while enjoying the benefits of block size and collateral diversity. The Fannie Mae GeMS execution is designed to be more nimble than conduit-style deals, and provide the flexibility to enable Fannie Mae to quickly address reverse inquiries.
Fannie Mae GeMS executions will be managed by broker-dealers from a syndicate group. DUS REMICs issued in 2009 and 2010 have been managed by dealers from the following syndicate group: Amherst Securities Group, L.P.; Bank of America Merrill Lynch; Citi; Credit Suisse; Deutsche Bank Securities; Jefferies, and J.P. Morgan.
Fannie Mae's DUS program was initiated in 1988, allowing DUS lenders to underwrite, close, service and sell multifamily mortgage loans to the company. The issuance of DUS mortgage-backed securities (MBS) began in 1994. As of September 30, 2010, the DUS market consisted of $44.6 billion in outstanding DUS MBS. In 2010, DUS MBS production reached $16.4 billion, and "Fannie Mae is committed to continue pursuing multifamily MBS production opportunities going forward," added Bacon,
The majority of DUS MBS are backed by a single loan on a multifamily property. Typical deal terms are:
$5-10 million loan size
10-year balloon term with 9.5 years of call protection
80% loan-to-value ratio
1.25x debt service coverage ratio
DUS products provide investment opportunities in high credit quality, prepayment-protected multifamily mortgage-backed securities that possess attractive features.