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Th e M Rep o RT | 61 O r i g i nat i O n s e r v i c i n g a na ly t i c s s e c O n da r y m a r k e t SECONDARY MARKET LocaL edition availability is necessary if the housing finance and mortgage lending industries are to recover from the financial crisis. They predict that if such a balance is not achieved, mortgage lending volumes and allocation of credit will continue to fall in the com- ing year and beyond. FHFa requests input in Building common gse security Uniting the gSe platformS raiSeS qUeStionS, and the regUlator wantS to hear them. WASHINGTON, D.C. // In the first step of what is planned to be a multiyear effort, the Federal Housing Finance Agency (FHFA) has requested industry input on the development of a common mortgage-backed secu- rity (MBS) designed to be issued and guaranteed by Fannie Mae or Freddie Mac. In a published proposal, the FHFA said the so-called "single security" will draw on the existing features of the Fannie Mae MBS and the Freddie Mac Participation Certificate (PC). Common features proposed for the security include a pay- ment delay of 55 days, minimum pool submission amounts, and loan repurchase, substitution, and removal guidelines, among others. By creating a single common MBS, the FHFA said it hopes to reduce trading value dispari- ties between the two GSEs and boost liquidity in the second- ary market. Currently, the two issue securities separately, with Freddie Mac historically trading less favorably on the market. In building the framework for the security, the FHFA is specifically seeking input on how legacy securities would be handled, the risk of disrupting the market, and other potential industry impacts that could result. The agency is accepting comments until October 13. The development of the single security marks a major step in the FHFA's plans for its conser- vatorship of Fannie and Freddie, part of which involves uniting the enterprises under a common securitization platform. In a statement, Andrew Bon Salle, EVP of single-family un- derwriting, pricing, and capital markets for Fannie Mae, said the company is committed to work- ing with FHFA on transitioning to a common platform, noting that the development is likely to take some time. Dave Lowman, EVP of single- family business at Freddie Mac, also pledged the company's sup- port, calling the FHFA's request for input "a milestone on the path towards a more competi- tive and resilient housing finance system." "We share FHFA's vision of a more liquid and transparent single security that can make the secondary market even more ef- ficient and keep homeownership within reach of America's work- ing families," Lowman said. Fannie, Freddie to Pay $5.6B on second- Quarter Profits WASHINGTON, D.C. // The United States government is ready to see another $5.6 billion from Fannie Mae and Freddie Mac as both GSEs continue to post solid earnings. Both companies released their earnings reports for the second quarter, reporting subdued prof- its compared to recent quarters as settlement earnings and other previous one-time benefits sub- side. In 2011, the Federal Housing Finance Agency, acting as con- servator for Fannie and Freddie, brought lawsuits against 18 banks for their alleged roles in bringing down the GSEs' portfolios with bad loans. The majority of those cases are now settled, leaving little for the companies to collect going forward. Those cuts in one-time earn- ings were offset in part by rising home prices and improvements in credit quality. For its part, Fannie Mae took in $3.7 billion in profits through the quarter, all of which will be handed to the Treasury per the terms of the GSEs' bailout in 2008. Freddie Mac, which re- ported $1.4 billion in net income, will return $1.9 billion to the government. By September, the two mortgage giants will have paid a combined $218.7 billion back to the Treasury, more than $30 billion more than the amount they've drawn since their bailout. Under their amended agreement, dividend payments will continue to go on as the government maintains its controlling stake in the companies. How long that situation will continue is still undecided as policymakers—from Congress to the White House—push to re- form the secondary market and bring in more private capital. While recent housing finance reform bills have made some headway in committee, debates over how to proceed have stalled any further progress, and no ma- jor moves are expected this year. Meanwhile, shareholders for the GSEs, spurred by their recent profitability, continue to pressure the companies and the government for their cut. Shareholders for the GSEs, spurred by their recent profitability, continue to pressure the companies and the government for their cut.