A single security that would be issued and guaranteed by Fannie Mae or Freddie Mac for trading in the to-be-announced market has been proposed.
The single-security project is intended to improve the overall liquidity of Fannie and Freddie mortgage-backed securities.
Fannie’s and Freddie’s conservator, the Federal Housing Finance Agency, said Tuesday that it seeks input on the proposed structure.
Development of the single security is a key goal of the regulator’s 2014 strategic plan for the government-sponsored enterprise’s conservatorships, It’s also a 2014 Scorecard item for both companies.
“FHFA is requesting public input on all aspects of the proposed single security structure and is especially focused on issues regarding the transition from the current system to a single security,” FHFA’s statement said. “Specific questions FHFA is asking relate to TBA eligibility, legacy Fannie Mae and Freddie Mac securities, potential industry impact of the single security initiative, and the risk of market disruption.”
Fannie Mae Executive Vice President, Single-Family Underwriting, Pricing, and Capital Markets, Andrew Bon Salle issued a statement indicating that the Washington, D.C.-based company is committed to the multi-year project. He said that the goal is to build a deeper, more liquid mortgage market.
Dave Lowman, executive vice president, single-family business, at McLean, Va.-based Freddie, called the request “a milestone on the path towards a more competitive and resilient housing finance system.”
Even the Mortgage Bankers Association chimed in.
“The move to a single security will enable the two GSEs to compete on a more level playing field, and this competition will be beneficial to both homebuyers and lenders,” MBA President and Chief Executive Officer David H. Stevens said in a written statement. “In addition, it will be an important piece to help transition the market to any new future structure by providing a more flexible and efficient way of trading securities.”
Stevens noted that MBA has held discussions for more than two years with the GSEs, policymakers and an array of stakeholders about the widespread benefits of a fungible, pooled, TBA-eligible GSE securities market.
FHFA is accepting written input until Oct. 13.
The full proposal in online at www.fhfa.gov/PolicyProgramsResearch/Policy/Documents/RFI-Single-Security-FINAL-8-11-2014.pdf
Input can be submitted online at www.fhfa.gov/AboutUs/Contact/Pages/Request-for-Information-Form.aspx or in writing to Federal Housing Finance Agency, Office of Strategic Initiatives, 400 7th Street, S.W., Washington, D.C., 20024.
