In May, Cleary Gottlieb closed 18 Freddie Mac, Fannie Mae and Ginnie Mae REMIC transactions, aggregating more than $14 billion of mortgage-backed securities. The firm represented the underwriters, including Barclays, Banc of America Securities, Bear Stearns, Citigroup, Countrywide, CSFB, Deutsche Bank, Goldman Sachs, Greenwich, JP Morgan Chase, Lehman, Morgan Stanley, Nomura and UBS. This activity brings total agency mortgage-backed deals handled by the firm in 2005 to more than $74 billion.
The second offering of Freddie Mac’s new Reference REMICSM came to market in May in a $987 million deal in which Cleary represented the underwriters. The launch of the Reference REMICSM program by Freddie Mac has been described by the issuer as being designed to be “more liquid than other structured securities” and “featur[ing] a shortened stated final maturity through a Guaranteed Maturity Class….” The Reference REMICSM securities are expected to be “offered on a quarterly basis as set forth in a pre-announced calendar….” In April, Cleary represented the underwriters in the $1.25 billion first offering of Reference REMICs.
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.