Fannie Mae, Freddie Mac Note Progress Toward Common Securitization Platform

NEW YORK–Representatives of Fannie Mae and Freddie Mac said they continue to make progress toward developing a Common Securitization Platform, but do not anticipate anything sooner than its projected 2018 implementation date.

Speaking here at the MBA National Secondary Market Conference & Expo, Andrew Bon Salle, executive vice president of single-family business with Fannie Mae, Washington, D.C., and Dave Lowman, executive vice president of single-family business with Freddie Mac, McLean, Va., expressed cautious optimism that the CSP, a new infrastructure for the securitization of single-family mortgages by Fannie Mae and Freddie Mac through the Federal Housing Finance Agency, is making progress.

“The Platform is becoming real; I feel good about where it is,” Lowman said. “We’ve worked really hard with Fannie Mae and FHFA to get to this point. The single-security is probably going to happen in 2018, when we have both Fannie Mae and Freddie Mac issuing securities. It’s a multi-year thing and we still have several years to go and I am optimistic that we can attract many market participants. It’s going to change the way business is done.”

Bon Salle offered a more cautious assessment. “Taking our part of the market and taking Freddie Mac’s part of the market and making it fungible is a challenge,” he said. “We have a lot of legacy systems that we have to overcome. We’re also trying to catch something that is moving. For the lending community, I don’t know how much things will change. We’ll still interact with lenders and work with them in moving to a strong securitization platform.”

MBA 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. Yesterday, 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.”

MBA Chairman Bill Emerson, CEO of Quicken Loans Inc., Detroit, noted that the GSEs can continue to play a strong role in the housing market, particularly as Millennials and other younger home buyers enter the marketplace. “There’s a lot of good data favoring home purchases,” he said.

Bon Salle said improving access to credit is a key priority. “Millennials want homes; it’s just a matter of when,” he said. “Minorities will make up most household growth in the coming years and we have to design programs that accommodate these new borrowers. Outreach is a huge component of how we attract these borrowers.

Lowman agreed. “The purchase market is coming back,” he said. “First-time home buyers make up a huge percentage of the loans we buy. Rates are going to rise; things happen when scarcity happens in the mortgage industry, so we’re seeing refis fade and lenders working as hard as they can to promote the products that they have. We have to get Millennials off the sideline. We recognize that they are not going to buy the way other generations have. They are slower to form households, but the question is not if, but when.”

Lowman added that he saw nothing “earth-shattering” in the future marketplace that hasn’t been invented to serve the purchase money business. “We need to focus on how to make better credit decisions,” he said. “Demographically, we have a lot more minority home buyers coming into the market and it’s going to force us all to figure out how to address these new households. In some cases, we will have multiple families living in the same house and we need to create products that appeal to those situations.”