The Federal Housing Finance Agency is moving ahead with plans to create a new securitization platform that will one day serve as a public utility for the issuance of mortgage-backed securities.
In a speech to business economists, FHFA Acting Director Edward DeMarco said that Fannie Mae and Freddie Mac would merge some of their existing operations in order to build the new platform. Eventually, however, the platform would be independent of both government-sponsored enterprises, including having its own chief executive and board of directors.
"Our objective, as we stated last year, is for the platform to be able to function like a market utility, as opposed to rebuilding the proprietary infrastructures" of Fannie and Freddie, DeMarco said in a speech late Monday.
The FHFA initially outlined the plan in detail in October, but DeMarco has given plenty of warnings of his designs well before then. Many observers have said that the GSE regulator is quietly moving ahead with reform while the Obama administration continues to stall in releasing a comprehensive plan for a housing finance revamp.
In his speech, DeMarco stressed that the GSEs’ securitization infrastructure is in dire need of an update.
The new securitization platform would initially be owned and funded by the GSEs. But once it is established, policymakers could use it as a "foundational element" for a new mortgage finance system, DeMarco said.
Several trade groups — including the Mortgage Bankers Association and American Bankers Association — have already raised objections about the ownership structure of the new platform.
But DeMarco stressed that the new platform will be "physically located" away from Fannie and Freddie.
"Importantly, we plan on instituting a formal structure for input from industry participants," he said.
DeMarco also noted in his speech that Fannie and Freddie laid the groundwork for doing credit risk-sharing transactions last year.
The FHFA has set a target for both Fannie and Freddie to complete $30 billion in single-family risk-sharing transactions in 2013.