SIFMA Provides Response to FHFA Request for Input on Proposed Single Security Structure

SIFMA provided feedback on the Federal Housing Finance Agency's ("FHFA") Request for Input ("RFI") regarding the alignment of the operations of Fannie Mae and Freddie Mac (together, "GSEs") and whether to direct the GSEs to issue a single form of mortgage-backed security ("MBS").

To create a "full understanding of the many granular details of this proposal," SIFMA listed considerations and suggestions in the "general ordering of priority" that it believes should be explored further:

• FHFA should continue to seek out and address industry feedback;
• FHFA should be confident that any changes to market pricing and liquidity will be net-positive before implementing any proposal similar to that which is described in the RFI;
• FHFA should examine and clarify issues related to the identity of the guarantor faced by investors, as well as other issues that create legal certainty, and ensure that any changes to the system will be durable;
• the performance of the GSEs' MBS must remain fungible, and FHFA must be prepared to take an active role to ensure their improved and continued alignment; and
• a prerequisite for success should be to reduce friction in any transition to a new MBS issuance framework, including ensuring appropriate compensation to holders of legacy MBSs for changes in payment delay upon exchange, and to minimize the cost of these exchanges.

See:SIFMA Response Letter.