Fannie Mae Said to Offer Risk-Sharing Debentures at Lower Yields

Fannie Mae, the government-controlled mortgage-finance company, is seeking to sell its first notes tied to the risk of homeowner defaults at lower relative yields than those offered in Freddie Mac’s debut deal, according to a person with knowledge of the transaction.

A $337.5 million, BBB- rated slice of the debt may pay about 2.25 percentage points more than the one-month London interbank offered rate, said the person, who asked not to be named because the terms aren’t set. A riskier $337.5 million unrated portion may price at a spread of 5.75 percentage points more than the benchmark. Freddie Mac sold similar bonds at spreads of 3.4 percentage points and 7.15 percentage points more than Libor in July.

U.S. regulators see the notes as a way to reduce the dominance of the two government-controlled firms and assess if they’re charging enough to guarantee their traditional mortgage bonds, embracing a risk-sharing approach that may play a central role in the future of the $9.3 trillion U.S. mortgage market.

The deal by Washington-based Fannie Mae may be completed early next week, the person said.