FHFA Proposes Single Fannie Mae, Freddie Mac Security

In the ongoing talk of reforming Fannie Mae and Freddie Mac, currently under government conservatorship, the Federal Housing Finance Agency today spelled plans for a single security that would be issued by either Fannie or Freddie.

The agency is seeking input from industry members on the proposed structure for the security—the outcome of a goal set by FHFA’s strategic plan for conservatorship of the government-sponsored enterprises for this year. 

The aim of the single security is to provide more liquidity in the market for mortgage-backed securities, a goal that will improve the market overall, FHFA says, noting the importance of a transition away from individual Fannie and Freddie securities to a single option. 

“The Single Security project is intended to improve the overall liquidity of Fannie Mae and Freddie Mac mortgage-backed securities by creating a Single Security that is eligible for trading in the to-be-announced (TBA) market,” the agency said in its request for comments. “FHFA is requesting public input on all aspects of the proposed Single Security structure and is especially focused on issues regarding the transition from the current system to a Single Security. Specific questions FHFA is asking relate to TBA eligibility, legacy Fannie Mae and Freddie Mac securities, potential industry impact of the Single Security initiative, and the risk of market disruption.”

Comments on the proposal will be accepted through October 13, 2014. 

Fannie Mae discontinued its purchase of home equity conversion mortgage-backed mortgage securities in 2010. Since then, Ginnie Mae has been the only issuer of HMBS. 

Among its plans FHFA has talked of a joint venture to replace Fannie Mae and Freddie Mac, as well as a wind down of the companies completely.

Written by Elizabeth Ecker

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