WASHINGTON (8/14/14)--The Federal Housing Finance Agency (FHFA) is seeking input on a proposed single security structure that would be issued by Fannie Mae or Freddie Mac--a proposal that merits further study from stakeholders, according to the Credit Union National Association.
The FHFA listed in its strategic plan for the year a goal of developing a single mortgage-backed security (MBS) as part of its efforts to build a common securitization platform.
"Maintaining a highly liquid secondary mortgage market is a fundamental requirement for the success of the single security. In order to achieve maximum market liquidity, the proposed single security would leverage the enterprises' existing security structures," reads the FHFA's official request for input, published Tuesday.
The agency's stated goal for the proposed single security structure is for legacy Fannie Mae MBS and legacy Freddie Mac participation certificates to be mutually interchangeable with the single security for purposes of fulfilling to-be-announced contracts, allowing for maximum market liquidity. If necessary, investors would be offered an option to exchange a legacy participation certificate for a comparable single security.
"CUNA supports measures that improve the efficiency and liquidity of the mortgage market," said Eric Richard, CUNA general counsel/executive vice president for regulatory affairs. "However, we need to continue studying the implications of this proposal for its impact on the prices credit unions receive for the sales of their mortgages to the government-sponsored enterprises, as well as the proposal's potential impact on the values of existing MBS investments."
The FHFA is requesting input on all aspects of the proposal, with a focus on:
- The transition from the current system to a single security;
- To-be-announced contract eligibility;
- Legacy Fannie Mae and Freddie Mac securities;
- Potential industry impact of the single security initiative; and
- Risk of market disruption.
All comments received will be made public and posted to the FHFA website.
Use the resource link below to access the full request for input.