A report was issued about the progress made on the development by the government-sponsored enterprises and their regulator of a Common Securitization Platform and single security.
The
2016 Conservatorship Scorecard for Fannie Mae, Freddie Mac, and Common Securitization Solutions requires the first use of the CSP software to be implemented in 2016.
The software implementation outlined in the scorecard is part of Release 1, whereas Release 2 calls for the CSP to begin being utilized to issue single securities within two more years.
On Thursday, the Federal Housing Finance Agency issued a update on the implementation of the single security and CSP.
FHFA said the single security is intended to preserve and enhance the to-be-announced market for GSE mortgage-backed securities.
“The goals of developing a single security are to establish a single, liquid market for the MBS issued by both enterprises that are backed by fixed-rate loans and to maintain the liquidity of this market over time, and achievement of these goals will enhance the liquidity of the TBA market,” the update stated.
The CSP — which is operated by Common
Securitization Solutions, a joint venture between Fannie and Freddie — is expected to reduce mortgage rates and improve the lending process while cutting transactions costs.
Various phases of required testing for the two releases
are described in the update.
Release 1 will allow Freddie to use various modules to perform activities tied to its current single-class, fixed-rate securities-participation certificates and giant PCs in addition to some activities related to the underlying loans.
“The progress charted in the Federal Housing Finance Agency’s latest update is leading to a more liquid TBA market and a stronger housing finance system,” Freddie said in a statement. “We look forward to working with FHFA, Fannie Mae, CSS and other stakeholders to reach the remaining milestones and bring the Single Security to market.”
Release 2 allows Fannie to do the same thing. Additionally, it allow both firms to use the CSP to issue and administer certain non-TBA mortgage securities, including Fannie’s securities that are backed by adjustable-rate mortgages.
Also, the planned issuance of the final single security features and market disclosures is outlined. This includes how privacy risks related to loan-level disclosures will be addressed.
In addition, information on the ongoing alignment of the GSEs’ programs, policies and practices, as well as the processes that will be followed to further support the single-security initiative, is provided.
The update addresses how potential changes in Fannie’s and Freddie’s
programs, policies and practices are reviewed. This is intended to maintain consistency with MBS prepayment rates.
“Today’s update highlights the progress Fannie Mae has made to date working with FHFA, Freddie Mac and Common Securitization Solutions to develop and bring the single security to market,” a statement from Fannie said.
