The Federal Housing Finance Agency (FHFA) has released an update on the progress made toward the Single Security that is expected to replace those currently issued by Fannie Mae and Freddie Mac (the GSEs). The update covers:
- The milestones that the GSEs and their joint venture Common Securitization Solutions (CSS), which is also charged with developing and implementing the Common Securitization Platform (CSP), must achieve to complete the project and FHFA's expectations about when that will happen.
- The final Single Security features and disclosures, including how privacy risks related to loan-level disclosures will be addressed; and
- How the GSEs and FHFA review potential changes in Fannie Mae and Freddie Mac programs, policies, and practices to help ensure the continuation of the current close similarity of the prepayment rates of the GSEs' mortgage-backed securities (MBS.)
The GSEs and CSS are current preparing for two releases of the platform. Release one will allow Freddie Mac to begin using three platform modules - Data Acceptance, Issuance Support, and Bond Administration - to perform activities related to its current single-class, fixed-rate securities (Participation Certificates (PCs) and Giant PCs) and certain activities related to the underlying mortgage loans such as tracking unpaid principal balances.
Release two will allow both GSEs to use those same modules plus a fourth, the Disclosure module, to perform activities related to their current fixed-rate securities, both single- and multi-class; to issue Single Securities, including commingled resecuritizations; and to perform activities related to the underlying loans. It will also allow them to use the CSP to issue and administer certain non-TBA mortgage securities, including Fannie Mae securities backed by adjustable-rate mortgages.
FHFA's 2016 Conservatorship Scorecard calls for the implementation of Release one this year and Release two in 2018.
Included in the Update are the various phases of testing that will be required for the two releases and the planned issuance of final Single Security features and disclosures to the market. It also provides information on the ongoing alignment of the GSEs' programs, policies, and practices and how they will be implemented to further support the Single Security initiative.
This table presents the timeline developed by FHFA showing key achievements to date as well as upcoming milestones with targeted completion dates. FHFA says it expects to announce the intended launch date for the Single Security in order to provide stakeholders at least 12 months' advance notice.
"This Update reflects our ongoing commitment to transparency. It also reflects the outstanding public and industry input and support we have already received and that we look forward to continuing to have as we move toward the goal of launching the CSP," said FHFA Director Melvin L. Watt. "The CSP and the Single Security are ambitious projects that we are confident should improve the overall efficiency and liquidity of the mortgage market and result in tremendous savings to taxpayers."