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GSE common security to come in 2018

In what could become a major piece of infrastructure for a reformed housing finance system, the government-sponsored enterprises Fannie Mae and Freddie Mac are on a schedule to begin issuing common security in 2018.

GSEAccording to the timeline released by GSE regulator the Federal Housing Finance Agency (FHFA), Freddie Mac will begin using a common securitization platform in the fourth quarter of this year as part of a first release. Sometime in 2018 a second version of the platform will be launched, and Fannie and Freddie will begin issuing a common security, FHFA said. 

The platform has been under development since 2014 by a company formed by Fannie and Freddie. The immediate aim of creating the single security is to promote a liquid market for fixed-rate loans, and also eliminate pricing disparities between Fannie and Freddie securities. As the larger of two government-sponsored enterprises, Fannie has had the market advantage.

In the debate over GSE reform, however, this platform has been likened to a new highway system for the secondary mortgage market, where individual home loans are sold and then bundled into securities. It is unclear what role Fannie and Freddie will assume in this new system of housing finance. House and Senate members have pledged to take up GSE reform next year, but the course of the reforms will likely depend on the outcome of the next presidential election. 

Some reform proposals envision merging the two GSEs and see the development of the common securitization platform as the first step in the process. 

FHFA Director Mel Watt said the agency is committed to “transparency," and was confident the work will ultimately improve efficiency and liquidity in the mortgage market, saving taxpayers money.  

FHFA said that it will provide more details on the second phase of the project sometime after September, and give the industry at least 12 months notice of the launch date of the common securities.


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