In July, Cleary Gottlieb closed 19 Freddie Mac, Fannie Mae and Ginnie Mae REMIC transactions, aggregating more than $17 billion of mortgage-backed securities. The firm represented the underwriters, including Barclays, Citigroup, 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 $108 billion.
July’s deals included the second series of Freddie Mac’s Reference REMICsm program. In this $2 billion transaction, Cleary represented a syndicate of underwriters led by DeutscheBank Securities, Morgan Stanley and UBS and including CSFB, Goldman Sachs, Lehman Brothers, Merrill Lynch and Greenwich Capital.
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.