Fannie Mae and Freddie Mac 

Credit Risk Transfer Index 

Framework 

July 2020 

This announcement does not constitute an offer to sell or the solicitation of an offer to buy securities of Fannie Mae or Freddie Mac. Nothing in this announcement constitutes advice on the merits of buying or 

selling a particular investment. Any investment decision as to any purchase of securities referred to herein must be made solely on the basis of information contained in Fannie Mae's or Freddie Mac’s applicable 

Prospectus and the Prospectus Supplement and the related legal documentation, and no reliance may be placed on the completeness or accuracy of the information contained in this announcement. 

You should not deal in securities unless you understand their nature and the extent of your exposure to risk. You should be satisfied that they are suitable for you in light of your circumstances and financial 

position. If you are in any doubt you should consult an appropriately qualified financial advisor.
Background

2

The Alternative Reference Rates Committee (ARRC) endorsed the Secured Overnight Financing Rate (SOFR) as its recommended 

alternative rate to LIBOR in anticipation of the potential cessation of LIBOR that may occur as soon as the end of 2021. 

New Issuance CRT: SOFR Method/Conventions

For new issuance CRT transactions (Freddie Mac, Q4 2020; Fannie Mae, Q1 2021, pending market conditions), Fannie Mae and Freddie

Mac (jointly, “the Enterprises”) intend to:

• Initially use a 30-day Average SOFR (compound average of SOFR, published by the NY Fed) as the reference rate, per market feedback (see slide 3 for 

more information)

• Subsequently transition to using an IOSCO compliant forward-looking One-month Term SOFR (see slide 4 for more information) at a later date, if the 

appropriate regulatory authority approves such a rate, and as soon as the One-month Term SOFR rate can be operationalized. 

• Such transition would include all previously issued SOFR-indexed CRT deals (with no anticipated spread adjustment) and any new issuance going 

forward

• Align CRT SOFR method/conventions for both Compounded SOFR and Term SOFR (if/when available)
30-day Average SOFR 

3

Directly use 30-day Average SOFR rate*, determined prior to the start of the 

accrual period 

SOFR rate is known in advance and used for both daily and monthly accruals

• No impact on secondary trade settlement

SOFR determination date aligns with current CRT convention for LIBOR 

determination

Conversion to Term SOFR, if/when available, requires minimal change 

operationally

Same SOFR method as used by agency CMOs and Freddie MF K-series

SOFR rate is not aligned with the accrual period, potentially resulting in basis 

risk when financing/hedging is used

Could be “stuck” with this misalignment of the index to the accrual period if 

Term SOFR never becomes available or is significantly delayed 

*30-day average SOFR published by the NY Fed, 

https://apps.newyorkfed.org/markets/autorates/sofr-avg-ind. 

Bloomberg ticker: SOFR30A Index

Setting In Advance: SOFR rate determined two business days prior to the start of Accrual Period 

Legend Rate Aligns with Accrual Period Rate Does Not Align with Accrual Period

24th

Accrual Period

August September

Fed Published 30 Day SOFR Rate

25th

8/23 

SOFR Determination

Date

9/25 

Payment

Date
Term SOFR

• The Enterprises intend to solely use Term SOFR (if/when available) for CRT issuances 

• Existing transactions indexed to 30-day Average SOFR will be converted to Term SOFR (with no anticipated spread adjustment) 

• Term SOFR methodology will be similar to that of LIBOR today (see below) 

4

25th

8/23 

SOFR

Determination Date

24th

9/25 

Payment

Date

Accrual Period

SOFR Forward Rate Period

August September

25th

8/23 

LIBOR

Determination Date

24th

9/25 

Payment

Date

Accrual Period

LIBOR Forward Rate Period

Current State: August September

One-Month LIBOR

Hypothetical Availability:

One-Month Term SOFR

If/when available

Legend

Rate Aligns with 

Accrual Period

Rate Does Not Align 

with Accrual Period
SOFR CRT Conventions 

5

Payment Date 25th day of each month (or the following business day (BD))

Benchmark 30-day Average SOFR (published by the NY Fed)

Transition to 1-month Term SOFR if/when available

Benchmark Adjustment Date 2 BDs prior to start of Accrual Period

Same for 30-day Average SOFR and Term SOFR (no change in Benchmark Adjustment Date)

Benchmark Adjustment Time 3pm (ET)

Accrual Period Beginning on and including the prior Payment Date, ending on and including the day preceding such Payment Date

Day Counts in Accrual Period # of calendar days in Accrual Period 

Designated page NY Fed, 30-day Average SOFR, https://apps.newyorkfed.org/markets/autorates/sofr-avg-ind

Bloomberg tickers: SOFR30A Index

Day Count Convention Actual/360

Benchmark Floored (Y/N) N

Interest Rate Cap Not Capped

Negative Interest Rates Coupon is floored at zero; benchmark is not floored 
6

Task Force

Fixed Income 

Marketing

Website and 

Resources CRT.FreddieMac.com | FannieMae.com/SFCRT

Thanks

Christian Valencia

Freddie Mac, Vice President, CRT

Christian_Valencia@freddiemac.com

(571) 382-3727

Thomas Jones

Fannie Mae, Capital Markets Specialist, CRT

thomas_jones@fanniemae.com

(202) 752-6085

Wei Wang

Freddie Mac, Associate Director, CRT

wei_wang@freddiemac.com

(571) 382-3606

Freddie Mac, CRT Marketing

Fixed_Income_Marketing@freddiemac.com

Sonya Sheth, Fixed Income Marketing, Manager

sonya_m_sheth@freddiemac.com

Key Contacts

Fannie Mae Investor Marketing

credit_securities@fanniemae.com

(800) 232-6643 Option 3