The American Securitization Forum said in a comment letter that it supports the Federal Housing Finance Agency’s proposal to create a single GSE securitization platform; but said the solution won’t be a good fit with fully private label securities.
The FHFA outlined plans for the platform in an Oct. 4, white paper. The platform would theoretically provide similar execution for Fannie, Freddie and private-label mortgage-backed securities. MBS issuers would adhere to same pooling and servicing agreements—and the same data reporting requirements and disclosures.
The GSE regulator said in October that it would accept public comments on the common platform until Dec. 3.
“ASF supports the development of a single securitization platform for fully guaranteed securitizations issued by either Fannie or Freddie,” said Tom Deutsch, executive director of the ASF in a press release. “We believe a single platform can promote greater standardization in the GSEs’ operations and create efficiencies for lenders to employ a standard interface with both Fannie and Freddie and begin to better align security performance between Fannie and Freddie.”
ASF members have already shown great support for standardizing the operations and requirements of the GSEs in the industry's single security white paper published last July. And through the ASF's project RESTART, members have collaborated over the last four years to develop market standards and practices for the private label securitization market.
But the ASF does not believe that the wholesale standardization the FHFA envisions in the single securitization platform for the GSEs can apply to fully private RMBS transactions.
“The work on ASF’s Project RESTART confirms our belief that while there is a desire among private market participants for model standards and practices on specific topics, wholesale standardization of offering and operative documentation for private label RMBS is likely not feasible,” said Deutsch. “When credit risk is sold, the incentives and potential liabilities among transaction parties change, resulting in transactions that differ in structure, governance and disclosure.”