Freddie Mac: Common Securitization Platform Will Benefit Market

Freddie Mac: Common Securitization Platform Will Benefit Market

04/29/2013 BY: KRISTA FRANKS BROCK

In the Federal Housing Finance Agency’s (FHFA) Conservatorship Priorities for 2013, delivered in early March, Acting Director Edward DeMarco discussed his goal of creating a common securitization platform for the GSEs. The platform will exist outside of Fannie Mae and Freddie Mac as an entirely independent venture and will replace their current systems for securitizing mortgages.

“[T]he overarching goal is to create something of value that could either be sold or used by policy makers as a foundational element of the mortgage market of the future,” DeMarco said.

As FHFA and the GSEs take the first steps toward developing this platform, Freddie Mac’s SVP of conservatorship and corporate initiatives, Stephen Clinton, outlined some of the positive impacts the platform could have on the market.

The common securitization platform “will reduce costs, improve transparency, and lower barriers to entry for private market credit risk takers,” Clinton said in a company blog post.

He insisted the platform will offer benefits for taxpayers, borrowers, and the housing finance system as a whole.

Clinton also praised FHFA’s role in the effort thus far, saying, “They are driving the process forward with a nuanced understanding that while standardization is a good thing, even good things can be overdone.”

The platform’s architects must strike a delicate balance by providing an effective solution for the market while not overstepping bounds and precluding the private market.

Without divulging any final decisions, Clinton said “most people” concur the platform should address securities issuances, while “such matters as credit models, pricing, and customer relationships should be left outside the platform.”

“A key public policy goal here is to attract more private investors in mortgage credit risk and limit the current concentration and taxpayer risk of Fannie Mae, Freddie Mac, and Ginnie Mae,” Clinton said.

Clinton said the future of Freddie Mac remains unknown, but the company is contributing to the creation of the common securitization platform “in a way that makes no assumptions about our own future state.”

The platform will ultimately encourage private investors by providing a sense of confidence in the market, according to Clinton.

When DeMarco first announced the endeavor in March,Mortgage Banker Association President and CEO David Stevens said, “Proposals of this magnitude need a transparent process to engage with stakeholders, articulate objectives and alternatives and demonstrate that stakeholders have been evaluated and addressed.”

 

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