In April, Cleary Gottlieb closed 17 Freddie Mac, Fannie Mae and Ginnie Mae REMIC transactions, aggregating more than $20 billion of mortgage-backed securities. The firm represented the underwriters, including Barclays, Citigroup, Goldman Sachs, Greenwich, JP Morgan Chase, Lehman, Morgan Stanley and UBS. This activity brings total agency mortgage-backed deals handled by the firm in 2006 to more than $55 billion.
April’s deals included the $3 billion first issuance by Freddie Mac of an enhanced Gold MACS security, including a combination feature that allows the creation of floater and inverse floater classes. Goldman Sachs served as the lead underwriter for this transaction, Co-managers of the transaction were Banc of America Securities, Barclays, Bear Stearns, Citigroup, Credit Suisse, Deutsche Bank, Greenwich, HSBC, JP Morgan, Lehman, Merrill Lynch, Morgan Stanley, Nomura and UBS.
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.