Freddie Mac just announced that it has implemented Release 1, utilizing the Common Securitization Platform (CSP). The Release was launched on November 21 and enables Freddie Mac to transfer certain securities operations for its Gold participation certificates (PCs) and Giant PCs to the CSP and to Common Securitization Solutions, LLC (CSS) which operates CSP.
Release 1 will pave the way for Release 2, in which a Freddie Mac and Fannie Mae will develop a single mortgage-backed security they will issue to finance fixed-rate mortgage loans backed by one- to four-unit single-family properties. This is known as the Single Security Initiative (SSI), and the new issue as Uniform Mortgages-Baked Securities (UMBS) to be guaranteed by either of the government-sponsored enterprises (GSEs). The resulting combined GSE market of to-be-announced (TBA) MBS is estimated at $3.5 trillion, second in size only to the global market for U.S. Treasuries.
Freddie Mac said the successful implementation of the CSP's core infrastructure and operations is a critical milestone on the path to the implementation of the SSI. The platform and the combined security have long been a large part of the Federal Housing Finance Agency's strategic plan for the GSEs. The two formed CSS as a joint venture.
"We're excited to use CSS operations and the CSP to support our securities issuance," said David Lowman, executive vice president of Freddie Mac's Single-Family Business. "This is a milestone marking several years of intensive work across Freddie Mac, Fannie Mae, CSS and FHFA to take this project from concept to reality. I'm very appreciative of the collaboration and drive exhibited by everyone working on this project. This is one of the ways we're working together to build a better Freddie Mac and a better housing finance system for families, customers and taxpayers."
Freddie Mac also announced the broad availability of Dealer Direct(SM), its online securitization portal. Authorized dealers can use this portal to form Freddie Mac Giant securities and access the Freddie Mac REMIC Structure Validation Tool. The company also plans to introduce Dealer Direct functionality that will permit the exchange of legacy PCs for the new UMBS Single Security or, if applicable, another new 25th pay date security. There are approximately $1.4 trillion in Freddie Mac 45-day PCs, of which an estimated $1.1 trillion are expected to be exchangeable by PC holders for 55-day UMBS once the new security is officially launched.
Commingled resecuritizations of UMBS, which can combine UMBS issued by Freddie Mac and/or Fannie Mae, will be called Supers and will be the counterpart to Giant PCs.
Fannie Mae issued a statement congratulating CSS and Freddie Mac on Release 1 and saying it looks forward to continuing work on Release 2 "to facilitate a smooth and transparent transition to the Single Security."