FHFA Issues Single Security, Common Securitization Platform Timelines

The Federal Housing Finance Agency released An update on implementation of its Single Security and the Common Securitization Platform for Fannie Mae and Freddie Mac, insisting that the goals will provide ease of use and transparency.

The Update (http://www.fhfa.gov/AboutUs/Reports/ReportDocuments/Implementation-of-the-SS-and-the-CSP_772016.pdf) details progress made to date and describes expected milestones that Fannie Mae and Freddie Mac and Common Securitization Solutions, a company created by the government-sponsored enterprises to create the platform, expect to meet to achieve the stated goals for these projects.

The Update describes the various phases of testing required for Release 1 and Release 2; announces planned issuance of final Single Security features and disclosures to the market; and provides information on the ongoing alignment of Enterprise programs, policies and practices and the processes that will be followed to further support the Single Security initiative.

“This Update reflects our ongoing commitment to transparency. It also reflects the outstanding public and industry input and support we have already received and that we look forward to continuing to have as we move toward the goal of launching the CSP,” said FHFA Director Melvin Watt.

The Mortgage Bankers Association and other industry players have long called for the CSP, saying it is key to creating uniformity and attracting more private capital into the secondary mortgage market, which continues to be dominated by Fannie Mae and Freddie Mac. At the MBA National Secondary Market Conference & Expo in May, MBA President and CEO David Stevens, CMB, reiterated MBA’s call to push for faster implementation of the Common Securitization Platform and the single security to ensure that these advances cannot be reversed called for its independent operation to bring “integrity, scale and standardization to the securitization market.”

Freddie Mac Executive Vice President of Single-Family Business David Lowman said it is meeting its requirements under the Single Security and CSP, noting it has completed joint system-to-system testing with CSS as preparation for using the Common Securitization Platform for activities related to Freddie Mac Participation Certificates and Giant PC issuance.

“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,” Lowman said. “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.”

Andrew Bon Salle, executive vice president of single-family business with Fannie Mae, also cited progress toward bringing the Single Security to market. “We continue taking steps to provide transparency around these efforts that will give market participants time to plan for and understand this change,” he said. “We will move forward with this work, with the ultimate goal of increasing liquidity in the housing finance market and creating a stronger system.”

FHFA’s 2014 Strategic Plan for the Conservatorships of Fannie Mae and Freddie Mac included the strategic goal of developing a new securitization infrastructure for Fannie Mae and Freddie Mac for mortgage loans backed by 1-4 unit (single-family) properties. Fannie Mae in turn formed CSS as a joint venture.CSS’s mandate is to develop and operate the platform that will support the GSEs’ single-family mortgage securitization activities, including issuance by Fannie Mae and Freddie Mac of a single mortgage-backed security and to develop it in a way that allows for the integration of additional market participants in the future. Single Securities will finance the same types of fixed-rate mortgages that currently back Enterprise-guaranteed securities eligible for delivery into the (TBA) market.

FHFA developed a timeline of key achievements to date as well as upcoming milestones with targeted completion dates and said it will update the timeline as milestones are reached. Later this year, FHFA said it expects to announce the intended launch date for the Single Security to provide stakeholders at least 12 months’ advance notice.