TheMReport — News and strategies for the evolving mortgage marketplace.
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60 | Th e M Rep o RT O r i g i nat i O n s e r v i c i n g SECONDARY MARKET a na ly t i c s the latest s e c O n da r y m a r k e t FHFa Plans the Future strategies of Fannie, Freddie Though talk abounds of doing away with the GSes, the federal government has plans to keep using the enterprises for recovery efforts. t he Federal Housing Finance Agency (FHFA) released its new strategic plan for the conservator- ships of Fannie Mae and Freddie Mac. In its report, the FHFA highlighted three tenets going forward for the GSEs: maintain foreclosure prevention activities; reduce taxpayer risk; and build a new, single-family securitization infrastructure. The first point in the strategic plan calls for a continuation of foreclosure prevention activities, as well as providing credit availability for new and refinanced mortgages to "foster liquid, competitive, and resilient national housing finance markets," according to the FHFA. The agency noted that Fannie Mae and Freddie Mac helped maintain broad liquidity in the secondary mortgage market—$6.4 trillion since 2009—helping to stem losses and provide lending opportunities. However, the FHFA feels that some originators have overcompensated, creating an environment that results in the rejection of many loans that would meet the GSEs' credit standards. Going forward, the FHFA would extend access to credit to borrowers who are qualified while keeping risk low. FHFA also plans to continue foreclosure prevention actions, noting that completed foreclosure prevention actions have totaled nearly 2.6 million instances since the onset of the housing crisis. Areas that are considered the hardest hit will be focused on to help recovery efforts continue. Secondly, the FHFA wants to reduce taxpayer risk by increasing the role that private capital plays in the mortgage market. The agency plans to continue transfers of mortgage securities to private investors. In 2013, the GSEs transferred substantial credit risk on $30 billion of mortgage-backed securities (MBS). The agency plans to continue reducing taxpayer risk by increasing the amount of credit risk to private capital through $90 billion of new mortgage-backed securities, tripling the amount compared to the previous year. Furthermore, the FHFA is directing Fannie and Freddie to submit plans to reduce portfolio assets to $250 billion by 2018. As of March 2014, Freddie Mac's portfolio stood at $434 billion and Fannie Mae's was $468 billion. "Reducing these retained portfolios continues to shift credit, asset liquidity, and interest rate risks from the Enterprises and onto private investors," the FHFA said. Finally, the agency plans to build a new single-family securitization infrastructure for use by the GSEs that is also adaptable for use by other participants in the secondary market. Currently, the GSEs issue two different mortgage securities that are not interchangeable, and Freddie Mac's security has historically traded less favorably compared to Fannie's. The common platform will help reduce the disparity between the two company's different securities. The FHFA plans to continue improving mortgage data standards for the GSEs, such as appraisal data, loan delivery data, loan applications data, mortgage closing data, and mortgage servicing data. The agency will continue efforts with the Uniform Mortgage Data Program in order to improve accuracy, increase transparency, assess risk, and create efficiencies for the mortgage industry. In its report, the FHFA highlighted three tenets going forward for the GSEs: maintain foreclosure prevention activities; reduce taxpayer risk; and build a new, single- family securitization infrastructure.