Mortgage experts are urging the Federal Housing Finance Agency to establish a formal, transparent process to guide its creation of a single-securitization platform.
The FHFA called for the developing a common securitization platform in its 2013 strategic plan that would provide potential savings for taxpayers.
Taking it a step further, a separate goal should be for the platform to create efficiencies in the securitization process by standardizing certain rule-based functions, according to the Mortgage Bankers Association’s latest white paper and the final installment in a series of reports on how to move to a single securitization structure.
"Because this platform is just one piece of a much larger puzzle that impacts borrowers, lenders and the market as a whole, FHFA should create an advisory board made up of industry representatives with the authority to direct the scope and immediate priorities of the platform’s development," MBA Chairman Debra Still said.
She added, "We believe that this panel should be created before any other further development is undertaken."
While a single-securitization platform is a shared outcome among many stakeholders, the timeline and scope of FHFA’s implementation of the platform has expanded since the project was first announced, leading to concerns that the platform will fail to meet the needs of the market when completed.
As a result, members of the MBA believe the platform should focus primarily on accommodating the needs of the current agency market, which should be done by focusing on developing a quality replacement for Fannie Mae and Freddie Mac’s current securitization activities.
Additionally, private issuers should have the option to access the single securitization platform, which would help level the playing field by allowing smaller issuers to access the secondary market, the MBA argues.
"Affording private issuers the option to use the platform would ensure that market standards are driven by competition, benefiting consumers, investors, and lenders alike," the white paper noted.
The common securitization platform should also be guided by significant industry input, with the goal of eventually turning the platform into an industry cooperative by putting in an advisory board made up of industry representatives.
Development of the platform also needs to realize significant savings for taxpayers through the consolidation of the enterprises back office personnel and systems, the MBA noted.
"The platform’s development should be redirected to be aligned with the original goal of costs and savings efficiency," the white paper explained.
Furthermore, the platform needs to be built from the start to facilitate the delivery of small lots — as few as single loans — into multi-lender pools.
Any reforms, whether transition steps or end-state reforms, should ensure that the secondary market provides equal access to smaller community-based lenders, which is viewed as important to revive a competitive market for investors and borrowers, the MBA explained.
"The steps in our plan continue moving the market in a positive direction toward a broad, competitive real estate finance system of the future," MBA CEO David Stevens said.
He concluded, "Each one of these steps advances necessary reforms to the secondary mortgage market in a manner consistent with the common objectives shared by the majority of end state proposals. It requires no congressional action and needs to begin right now."