The Federal Housing Finance Agency (FHFA) has published a Request for Input on the proposed structure for a Single Security that would be issued and guaranteed by the government-sponsored enterprises (GSEs)—Fannie Mae or Freddie Mac. Developing the Single Security is a key goal of FHFA’s 2014 Strategic Plan for the Conservatorships of Fannie Mae and Freddie Mac and is a 2014 Scorecard item for both companies.
The Single Security project is intended to improve the overall liquidity of Fannie Mae and Freddie Mac mortgage-backed securities by creating a Single Security that is eligible for trading in the to-be-announced (TBA) market. 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. 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.
“For more than two years, we have been talking to the GSEs, policymakers and a broad array of stakeholders about the widespread benefits of a fungible, pooled, TBA-eligible GSE securities market. This announcement takes what many told us was an unworkable fantasy and brings it closer to reality," said David H. Stevens, president and CEO of the Mortgage Bankers Association (MBA). “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. 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. Director Watt and his team deserve a lot of credit for moving forward on this critical initiative, and we look forward to working with FHFA and the GSEs on implementation.”
Camden R. Fine, president and CEO of the Independent Community Bankers of America (ICBA), commented, "Community banks that sell to the government-sponsored enterprises (GSE) typically only sell to one GSE. This means that community banks wouldn’t likely see the trading difference between the securities as they sell their loans for cash rather than create mortgage-backed securities pools."