Fannie Mae Provides Update on Payments for Small Subset of CMOs
On July 1, 2023, Fannie Mae's legacy Single-Family and Multifamily LIBOR-indexed Collateralized Mortgage Obligations (CMOs) transitioned to the Federal Reserve Board-recommended LIBOR replacement rate, the 30-day Average SOFR calculated in advance of the interest rate period. However, the corresponding derivatives for 25 Single-Family and Multifamily CMO CUSIPs transitioned to the ISDA-recommended LIBOR replacement rate (this rate was also selected by the Federal Reserve Board as the replacement rate for derivatives transactions in its final rules), the 30-day Average SOFR calculated in arrears of the interest rate period.
As a result, there may be a mismatch between payments owed on the CMOs and the derivatives beginning with the August 25 payment. Under certain circumstances, such a mismatch could result in lower payments on the derivative. Under those circumstances, this could result in lower or delayed payments on the CMO certificates. As specified in the relevant prospectus supplement, the guaranty from Fannie Mae does not apply to amounts owing on the derivative. Please note that this mismatch in fallbacks is limited to the 25 CUSIPs listed below.
A list of impacted Single-Family and Multifamily CMO CUSIPs can be found here.
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This announcement does not constitute an offer to sell or the solicitation of an offer to buy securities of Fannie Mae. Nothing in this announcement constitutes advice on the merits of buying or selling a particular investment. Any investment decision as to any purchase of securities referred to herein must be made solely on the basis of information contained in Fannie Mae's applicable Prospectus and the Prospectus Supplement and the related legal documentation, and no reliance may be placed on the completeness or accuracy of the information contained in this announcement.
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