SIFMA Encourages Alignment of GSE Operations

In a letter filed Wednesday to FHFA, the ""Securities Industry and Financial Markets Association"":http://www.sifma.org/ (SIFMA) expressed its view that ""Fannie Mae"":http://www.fanniemae.com/portal/index.html and ""Freddie Mac"":http://www.freddiemac.com/ should seek to align their operations as much as possible.

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The alignment would help set the stage and ease transition into the future for the GSEs, SIFMA suggests.

""The alignment of the operations of the GSEs will set the state for the future of both the Enterprises and for mortgage finance more broadly,"" said Richard Dorfman, managing director of head of the SIFMA Securitization Group. ""SIFMA is focused on the preservation and maximization of the liquidity of the TBA markets and the maximization of the benefit of forward sales of MBS that they provide to consumers.

""These include liquidity, ability to lock rates, national mortgage markets, broad availability of fixed-rate products, and the attraction of massive amounts of capital to the U.S. mortgage markets,"" he added.

Market performance shows a gap between the perceived and actual performance and liquidity

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of mortgage-backed securities issued by the GSEs.

The liquidity differential impacts the cost and efficiency of the GSE securitization process and the ability of the enterprises to fund mortgage lending.

In its letter, SIFMA suggests that alignment will help lay the groundwork for future efforts to close that gap and fix any causes. The FHFA will have to view the GSEs together in order to fully address this issue, SIFMA says.

SIFMA also submitted a list of steps and goals of FHFA's Strategic Plan to coordinate the GSEs and says they will require communication, careful planning, and a focus on the enterprises' core activities from the industry at every stage.

""This plan will require collaboration between the regulators, the GSEs, and the industry,"" said Chris Killian, managing director in the SIFMA Securitization Group. ""The industry cannot be presented a plan which it did not help create.""

Also expressed in the letter is SIFMA's belief that opportunities are currently available to begin addressing the performance differential between Fannie Mae and Freddie Mac. The association calls for focus on improving the existing ""cheapest-to-deliver"" securities in each market, a step which can be done independently of the Strategic Plan and which should see immediate returns.

The letter specifically suggests alignment in the following areas: Modernization of the Enterprises' aged infrastructures, operations from underwriting to servicing, implementation of new programs (including deadlines, work plans, and final implementation), and payment of security holders.

In addition, SIFMA says the Enterprises should work together to homogenize credit quality and to address how to best structure securities exchange programs.