In August, Cleary Gottlieb represented the underwriters, including Barclays, Citigroup, Countrywide, Greenwich, HSBC, JP Morgan Chase, Lehman, Morgan Stanley and UBS, in 20 Freddie Mac, Fannie Mae and Ginnie Mae mortgage-backed transactions, totaling more than $10 billion of mortgage-backed securities in August and over $111 billion so far in 2006.
In general, the “agency” transactions involve the issuance of mortgage-backed securities, in each case guaranteed by Freddie Mac, Fannie Mae or Ginnie Mae. Ginnie Mae is part of the U.S. government, while Freddie Mac and Fannie Mae are government-sponsored, publicly-owned companies. In each transaction, the underlying assets were residential mortgage loans. The cash flows on these mortgages support the issuance of securities. The securities were issued in multiple classes, with some of the deals issuing more than 50 classes.
This type of mortgage securitization—originally known as a CMO—was pioneered by Cleary Gottlieb in 1983, and now accounts for roughly one-third of the total debt issuances on Wall Street. Economists estimate that the existence of securitizations has reduced prevailing mortgage rates in the United States by about 1/2 of 1% per annum since their introduction.