The Federal Housing Finance Agency's (FHFA) new proposal for GSE reform brings little new to the table, securitization experts said.

Yesterday the FHFA announced a strategic roadmap for the future of Fannie Mae and Freddie Mac.

The only new aspect of the regulator's proposal is the potential consolidation of the two GSEs' securitization operations, FTN Financial analysts said in a report released today.

In its proposal, the FHFA suggested investing in a new securitization platform that generally resembles a public utility.

"The platform would essentially merge the securitization operations of Fannie and Freddie," FTN analysts said. "Having one very large securitization operation may be the most economically efficient structure. The statement notes that such a large infrastructure investment would require significant support from the American taxpayer."

The FHFA outlines that this new combined securitization platform would provide an attractive return for American taxpayers.

However, what the proposal lacks is a concrete plan of action that, at this point, is necessary to get the private-label RMBS market back on its feet again.

"The recent Dodd-Frank Bill has created a great degree of uncertainty surrounding, among other things, the costs and benefits of creating non-agency securitizations," analysts said. "This has certainly not helped the development of the non-agency MBS market."

But the FHFA's part in this is not to resolve the role of the GSEs. As such its proposal is equally bound by the legal constraints that require legislative approval. 

In a report, Bank of America Merrill Lynch analysts noted that the proposal was intended to provide both lawmakers and the public with an outline of how FHFA as a conservator intends to guide Fannie and Freddie over the next few years.  

"Although we consider the FHFA strategy report as an important guide to developments to come it remains totally up to lawmakers to define the future structure of housing finance and the roles that Fannie and Freddie may or may not play in this future," BofA Merrill analysts said in the report.


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