Fitch Affirms Fannie Mae's Connecticut Avenue Securities (CAS), Series 2014-C01

Fitch Ratings has affirmed one class in the following Government Sponsored Enterprise (GSE) Risk-Sharing Transactions:

Fannie Mae's Connecticut Avenue Securities (CAS), Series 2014-C01:

--Class M-1 (CUSIP 30711XAC8) at 'BBB-sf'; Outlook Stable.

The following classes are not rated by Fitch:

--Class A-H

--Class M-1H

--Class M-2 (Cusip 30711XAD6)

--Class M-2H

--Class B-H

KEY RATING DRIVERS

The notes are general unsecured obligations of Fannie Mae (rated 'AAA'; Outlook Stable). Payments on the notes are subject to the credit and principal payment risk of a reference pool of certain residential mortgage loans held in various guaranteed MBS.

The reference pool has performed well to date, reporting less than 25 basis points (bps) delinquency as of the most recent remittance report. Less than 10% of the initial pool balance has prepaid to date and, consequently, the credit composition of the reference pools has changed little since issuance a year ago.

Property values in the reference pool have benefitted from home price appreciation. Weighted average combined loan-to-values have improved from approximately 68% at origination to below 65% today.

Credit enhancement (CE) as a percentage of the remaining pool balance has increased modestly since issuance. CE for rated M-1 notes has grown from 1.65% to 1.76%.

Fitch's mortgage loss projections have not changed materially since issuance. In the base-case scenario, Fitch expects the reference pool to incur less than 25 bps in loss.

RATING SENSITIVITIES

Fitch's analysis includes rating stress scenarios from 'CCCsf' to 'AAAsf'. The 'CCCsf' scenario is intended to be the most likely base-case scenario. Rating scenarios above 'CCCsf' are increasingly more stressful and less likely outcomes. Although many variables are adjusted in the stress scenarios, the primary driver of the loss scenarios is the home price forecast assumption. In the 'Bsf' scenario, Fitch assumes home prices decline 10% below their long-term sustainable level. The home price decline assumption is increased by 5% at each higher rating category up to a 35% decline in the 'AAAsf' scenario.

Fitch currently considers national home prices to be at or near sustainability and does not expect either positive or negative movements in prices in the near future. While Fitch's ratings reflect this home price view, the ratings of outstanding classes may be subject to revision to the extent actual home price and mortgage performance trends differ from those currently projected by Fitch.

Additionally, because of the counterparty dependence on Fannie Mae, Fitch's rating on the notes could be affected by the Issuer Default Rating (IDR) of the GSEs if the IDR was to fall below the credit rating implied by the relationship of CE to expected reference mortgage pool loss.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'U.S. RMBS Surveillance and Re-REMIC Criteria' (June 24, 2014);

--'Global Structured Finance Rating Criteria' (May 20, 2014);

--'U.S. RMBS Loan Loss Model Criteria' (Nov. 17, 2014);

--'U.S. RMBS Cash Flow Analysis Criteria' (April 16, 2014);

--'Criteria for Interest Rate Stresses in Structured Finance Transactions' (Jan. 23, 2014);

--'Criteria for Rating Caps and Limitations in Global Structured Finance Transactions' (May 28, 2014);

--'Counterparty Criteria for Structured Finance and Covered Bonds' (May 14, 2014);

--'Structured Finance Recovery Estimates for Distressed Securities' (Nov. 18, 2011).

Applicable Criteria and Related Research:

Structured Finance Recovery Estimates for Distressed Securities

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=656557

Counterparty Criteria for Structured Finance and Covered Bonds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Criteria for Rating Caps and Limitations in Global Structured Finance Transactions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748781

Criteria for Interest Rate Stresses in Structured Finance Transactions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=695535

U.S. RMBS Cash Flow Analysis Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=746027

U.S. RMBS Loan Loss Model Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=810788

U.S. RMBS Surveillance and Re-REMIC Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750110

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=977355

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