FHFA to Implement Common Securitization Platform at Freddie Mac First

The Federal Housing Finance Agency (FHFA) issued an update to their Common Securitization Platform (CSP) on Tuesday outlining the progress that as been made in developing a new infrastructure for the securitization of single-family mortgages by Fannie Mae and Freddie Mac.

In the update, the FHFA announced that the platform's implementation date will be in 2016, although it is still unclear as to exactly when the CSP will go into effect. In addition, the agency noted that Freddie Mac will use the CSP first, followed by both Fannie Mae and Freddie Mac's use of the CSP to issue Single Securities.

The FHFA's update also discusses the organizational structure of the CSS and various modules that make up the CSP and their functions.

"Developing the CSP is a large-scale, multi-faceted project," said FHFA Director Melvin L. Watt. "This Update details significant progress that has been made to date in building and testing the CSP, and toward launching a Single Security. Together, these projects will bring us much closer to the goal of improving the overall liquidity of the mortgage market. They will also reduce costs for Fannie Mae and Freddie Mac and taxpayers."

The creation of the Common Securitization Platform was a major goal of the FHFA's 2014 Strategic Plan for the Conservatorships of Fannie Mae and Freddie Mac, while building and testing the platform was an item on the 2015 Scorecard. Common Securitization Solutions (CSS) was created by the GSEs to operate the CSP.

The 2014 Conservatorship Strategic Plan for Fannie Mae and Freddie Mac consisted of creating a single MBS that the enterprises could provide finance fixed-rate mortgage loans backed by one to four single-family unit properties. According to the FHFA, the initial goal was to assist in building a Common Securitization Platform (CSP) and support the statutory obligation to ensure the liquidity of the nation’s housing finance markets issued by the FHFA. Taxpayers would also not have to suffer the cost of subsidizing Freddie Mac’s securitization of single-family mortgage loans with the Single Security initiative.

“Today’s Single Security Update is an important milestone, providing additional details on the features of the Single Security and the strong progress made to date by Fannie Mae, Freddie Mac, and Common Securitization Solutions (CSS) on implementation planning,” said Andrew Bon Salle, EVP of single-family business at Fannie Mae. “We will continue to work with FHFA, Freddie Mac, and CSS to ensure we transition to the Single Security in a safe and sound manner.”

 

In an effort to inform Congress of the their regulated entities goals, activities, and missions, the FHFA released their 2014 Report to Congress in June, which examines and reports the activities of Freddie Mac, Fannie Mae, 12 Federal Home Loan Banks (FHLBanks), and the FHLBanks’ Office of Finance. The agency also reported the goals set forth for the GSEs and FHLBank’s mission and affordable housing programs they offer.

The report highlights that the FHFA aimed to reduce taxpayer risk through increasing the role of private capital in the mortgage market, and also build a new single-family securitization infrastructure (the CSP) for use by the GSEs and adaptable for use by other participants in the secondary market in the future. These goals were outlined in the 2014 Conservatorship Strategic Plan and the 2014 Conservatorship Scorecard.

“The 2014 Conservatorship Scorecard expressed the expectation that the Enterprises would, expand the volume and types of transactions that transfer single-family mortgage credit risk from the Enterprises to the private sector, continue the ongoing reduction of the Enterprises’ retained portfolios, with a focus on the sale of their less liquid assets, and take steps to ensure the stability of mortgage insurance companies that are important Enterprise counterparties, the FHFA report said. “FHFA’s 2014 Conservatorship Strategic Plan and Conservatorship Scorecard continued to make building a new infrastructure for the securitization functions of the Enterprises an important priority”

 

The FHFA is also welcoming public input on the CSP update, which can be submitted on the agency's website.

Click here to view the FHFA's Common Securitization Platform update.