In April, Cleary Gottlieb closed 20 Freddie Mac, Fannie Mae and Ginnie Mae REMIC transactions, aggregating more than $13 billion of mortgage-backed securities. The firm represented the underwriters, including Barclays, Banc of America Securities, Bear Stearns, Citigroup, CSFB, Deutsche Bank, Goldman Sachs, Greenwich, JP Morgan Chase, Lehman, Morgan Stanley, Nomura and UBS. This activity bring total agency mortgage-backed deals handled by the firm in 2005 to more than $57 billion.
April saw the $3 billion launch of Freddie Mac’s Reference REMICsm program in which Cleary represented the syndicate of underwriters. According to Freddie Mac, its Reference REMICsm securities are designed to be more liquid than other structured securities, featuring a “shortened stated final maturity through a Guaranteed Maturity Class.” Freddie Mac is expected to offer the Reference REMICsm securities on a quarterly basis according to a previously announced calendar.
These “agency REMIC” transactions involve the issuance of mortgage-backed securities, guaranteed by Freddie Mac, Fannie Mae or Ginnie Mae. Ginnie Mae is an association wholly owned by the U.S. government. Freddie Mac and Fannie Mae are government-sponsored, publicly owned companies. In each transaction, the underlying assets were residential mortgage loans.
Cleary pioneered this type of mortgage securitization, originally known as a CMO (collateralized mortgage obligation), in 1983. REMICs now account for roughly one-third of the total debt issuances on Wall Street. Economists estimate that the existence of this type of transaction has reduced prevailing mortgage rates in the United States by about ½ of 1% per annum during the 20 years since the CMO was introduced.