WASHINGTON The regulator for Fannie Mae and Freddie Mac announced a plan yesterday to create a new secondary market platform by combining the securitization operations of both companies through a new private entity that would be jointly owned by the two mortgage giants
“The overarching goal is to create something of value that could either be sold or used by policy makers as a foundational element of the mortgage market of the future,” said the regulator, Edward DeMarco, who is the acting director of the Federal Housing Finance Agency.
“We are on a path to replace the outdated proprietary operational systems of Fannie and Freddie,” Mr. DeMarco told reporters. “It could be turned to some form of a market utility.”
The two companies buy about two-thirds of all residential mortgages-including more than half of all credit union mortgages—and repackage them into mortgage-backed securities for sale on the secondary market. Fannie- and Freddie-backed MBS are among the few securities deemed permissible investments for all credit unions.
The new joint securitization company will have its own chief executive officer and chairman, and will be funded by Fannie and Freddie, according to DeMarco. It will create a single standard for issuing securities that could survive independently if the two companies are eliminated, he said. DeMarco expects Congress will ultimately decide how the securitization platform is operated and whether it should be privatized.
The new venture is not expected to begin securitizing loans until next year. Instead, the focus will be on creating the business and hiring staff.
