Loan-level data coming to Fannie, Freddie MBS investors
Federal Housing Finance Agency Acting Director Edward DeMarco said before a House subcommittee Wednesday investors in Fannie Mae and Freddie Mac mortgage-backed securities can expect to receive loan-level data on these pools in the future. The Securities and Exchange Commission proposed amendments to Regulation AB recently to provide more data and tools to investors and reduce a reliance on credit rating agencies. Under the amendment, issuers are required to provide standard information about loans in a pool and file a computer program investors could access through the SEC to analyze more information about the loans. Currently, issuers can sell ABS almost immediately without providing investors time to review the materials, but under the SEC proposed amendment, issuers would have to file a preliminary prospectus five days before the first sale. But DeMarco said Fannie and Freddie are exempt from the rules. "In an effort to give investors a transparent view of the assets underlying their securities, the (GSEs) have attempted to ensure that their MBS disclosures parallel those required by the SEC in certain areas," DeMarco said. For years, investors went without loan-level data when buying these securities. Beginning in 2003, the government-sponsored enterprises began disclosing loan-to-value ratios, servicer identities, credit scores and property type – but only on a pool-level basis. Two years later, Freddie Mac began providing more granular, loan-level information, but the current Regulation AB disclosures for private-label MBS go beyond Freddie's, DeMarco said. Even serious-delinquency data only first appeared in 2010 for Fannie Mae and was available only as an aggregate statistic for groups of MBS that shared the same pass-through rate, loan product type or issuance year. In January, Freddie began providing pool-level delinquency data on a monthly basis for single-family and jumbo MBS. Proposed Regulation AB requirements would make issuers provide loan-level disclosures of delinquency status on these assets. While the proposal exempts Fannie and Freddie, DeMarco said the two are at work to provide more information to investors. In 2010, the GSEs began work on uniform standards for data reporting on mortgages and appraisals. "This Uniform Mortgage Data Program is designed to improve the consistency, quality, and uniformity of data that are collected at the front end of the mortgage process. By identifying potential defects at the front end of the mortgage process, the enterprises will improve the quality of mortgage purchases, which should reduce repurchase risk for originators," DeMarco said. He said the program will be phased in over the rest of 2011 and into 2012. More transparency will come through a recent alignment of guidelines and payment structures on the servicing side. But DeMarco said loan-level data is on its way. "Following these initiatives, enhancing loan-level disclosures on enterprise MBS, both at the time of origination and throughout a security’s life, is on our agenda," DeMarco said. "This will take time to accomplish, but this is the direction in which we are heading." Write to Jon Prior. Follow him on Twitter @JonAPrior.