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Investments

Single-securitization platform prototype may be ready next year

Regulators took the stage at the Mortgage Banker Associations’ Secondary Market Conference Sunday, outlining the progress of the single-securitization platform, indicating that a test prototype platform should be up and running by 2014.

This goal set forth by the Federal Housing Finance Agency and the government-sponsored enterprises is to incorporate mortgage participants’ feedback into the prototype development, which will hopefully result into a platform creation that suits the industry's needs, explained Tim Yanoti, senior vice president of securitization at Fannie Mae.

Although no timeline has been officially set in stone, the goal is to have a functioning test platform in place by next year to begin gradually winding down government control. 

The overall outcome of the single-securitization platform is in line with the majority consensus on Capitol Hill, shrinking the 95% hold both Fannie Mae and Freddie Mac have over the market. 

"The effort that we have in front of us is largely about finding the right balance between standards and competition," said Mark Hanson, senior vice president of securitization division at Freddie Mac.

Additionally the Common Securitization Platform is in the process of producing an industry advisory group, or Bond Administration, that will provide feedback to the enterprises as well as the FHFA to express which products and structural developments are working. 

The group would be set up similarly to the Treasury Borrowing Advisory Committee, which is an organization of industry professionals that get together and advise the U.S. Department of Treasury on what is happening within the capital markets, the panelists explained.

The main concern that kept coming up from investors, borrowers and servicers during the conference was the level of accessibility to the platform.

The whole idea, initially, is for the GSEs to use the five modules outlined in the 2013 Conservatorship Scorecard, which would be created into an interface. The interface would then be developed for broad-base accessibility, so that all industry members can sync up to the platform, stated Manoj Singh, associate director of the office of strategic initiative at the FHFA.

In general, all three panelists agreed that the main goal of the single-securitization platform is to bring private capital back in the market, which would relieve the government of its burden of taking credit risk.

As a result a contractual framework must be developed that allows the private market to share in the credit risk and more importantly, trying to discover a new investor who can withstand such credit risk — industry experts are hopeful this single-securitization platform will be able to provide private skin in the game.

cmlynski@housingwire.com

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