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FHFA floats a new plan for uniform MBS structure

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The Federal Housing Finance Agency is seeking comment on a proposal that could pave the way for potential Fannie Mae and Freddie Mac competitors to use the uniform mortgage-backed security structure.

The plan the FHFA released a request for input on Monday would route the majority of the government-sponsored enterprises’ securitized production into larger multilender pools as a means of achieving this long-term UMBS goal.

FHFA Director Mark Calabria

Bloomberg

In addition, the RFI seeks comment on ways that Fannie Mae and Freddie Mac could handle situations where the prepayment behavior of a particular lender’s loans departs from industry norms and has an adverse effect on investors.

FHFA Director Mark Calabria in a speech at the Structured Finance Association’s residential mortgage conference stressed that the RFI was designed to help the agency chart a path forward for the UMBS structure, not an indication of any shortcomings in its June launch, which he called a “success.”

The FHFA also is hoping to make a call on whether to repropose its draft capital rule in the next couple weeks, Calabria told attendees at the meeting, noting that he remains concerned about the undercapitalized GSEs’ risk.

“I would like to get these enterprises a lot less leveraged than they are today,” he said.

Under the current capital rule proposal, the GSEs are required to collectively raise $125 billion before being released from conservatorship, but that “could take a lot of years,” Don Layton, the former CEO at Freddie Mac, noted in a separate session at the conference, reiterating concerns he has had about the process. Layton is currently a senior fellow at Harvard University’s Joint Center for Housing Finance.

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