Allstate Insurance Co.s treasurer said the company expects to lose about $100,000 on its purchase of the first chunk of mortgage- backed securities to be set up under a special program linking Fannie Mae with the community group Acorn.
The two collateralized mortgage obligations of $5 million both have Aug. 11 settlement dates and will be treated as private placements. The price and terms haven't been determined yet, but Myron Resnick, Allstate's senior vice president and treasurer, said The spread is such that were giving up a nominal rate.
On $10 million, well be giving up $100,000 to make it possible for loans below market rate to be granted, Resnick said.
NationsBank will originate the loans and Fannie will package them. The arrangement was announced July 24 during the national convention of the Association of Community Organizations for Reform Now.
Allstate thus becomes the first company to buy some of the $55 million in below-market MBS that Fannie Mae has promised to issue under a special initiative with Acorn. Fannie Maes chairman, James Johnson, couldn't say when the next purchaser would surface. He noted that Fannie also might buy some of the securities and hold them in its portfolio.