In June, Cleary Gottlieb closed 18 Freddie Mac, Fannie Mae and Ginnie Mae REMIC transactions, aggregating more than $18 billion of mortgage-backed securities. The firm represented the underwriters, including Barclays, Citigroup, Countrywide, 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 $89 billion.
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.