Agency MBS certainly dominate the market today in many respects, but as one aspect of the recent strategic plan for the GSEs highlights, the private-label market can be considered ahead of them in terms of loan-level disclosure and it is time for that to change.

The private-label MBS market has provided more extensive information than the GSEs in this area to date because “if you're selling credit risk [as opposed to a guarantee] directly to investors, then obviously investors are going to have to do more extensive analysis of the underlying portfolio,” noted Fitch managing director Rui Pereira, when asked about the comparison.

“You need granular loan-level information to do that analysis,” he said.


This has been the case for some time. But the Federal Housing Finance Agency's (FHFA) plan means it could be changing. The move will likely benefit both agency and PL MBS as it fosters competition in the market.

“The private-label market has always required much more information relative to the GSEs,” said Pereira. But, as he noted, one of the plan's goals “is to get more private sector financing of mortgages going forward.

“So I think being able to provide those investors more information kind of goes hand-in-hand with that strategy,” he said.

When asked about the loan-level reporting component of the FHFA's plan for mortgage-backed securities relative to what has been done in the private-label market and how they might compare, Pereira said, “I think what they're ultimately going to try to do is to move in the direction of what's been developed in the private-label market and that is, provide more loan-level disclosure for their portfolios.”

This would be more “granular” information for investors “compared to what's presently being provided by the GSEs,” he said.

“Are they going to or will they adopt the [private-label market's American Securitization Forum] sort of data template? Probably not,” said Pereira, when asked about this. Rather the GSEs will most likely be drawing up their own disclosure standards, he said.

A spokesman for Fannie Mae, which has begun releasing some additional at-issuance or origination loan-level data in line with the strategic plan's goal, declined to characterize how the GSE's efforts in this area might compare to what has been done in the PL MBS market, expect to say that Fannie's efforts will be “consistent with the general trend to provide more loan-level data.”

Ultimately the FHFA's plan calls for the GSEs to provide not only at-origination loan-level disclosures on enterprise MBS but also “throughout a security's life” with the aim of establishing consistent and accurate information about the bonds in such a way that private investors can “efficiently measure and price mortgage credit risk.”

Also , the Fannie spokesman declined to comment on what steps the GSE might take next in this area and when. The FHFA's plan does say in terms of relative timing and priorities that the loan-level data is “a prerequisite for private capital to bear a meaningful portion of mortgage credit risk.”

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