Fannie Mae and Freddie Mac unveiled a new strategy for their legacy joint venture, aligning with priorities set by President Trump and their federal overseer.
Their Common Securitization Solutions JV will be renamed U.S. Financial Technology to reflect a new role in which it will sell access to the mortgage-backed securities platform used to manage their $6.5 trillion portfolio to others, according to a press release issued Thursday.
The news arrives following speculation that CSS could play a role in fulfilling
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"We created U.S. Fin Tech to demonstrate the incredible ingenuity of American technology under President Trump's leadership," said Pulte, who also has similarly rebranded the Federal Housing Finance Agency he heads. (Pulte now calls his agency U.S. Federal Housing FHFA.)
Tony Renzi, a former GSE executive who also has worked in the private sector, will remain at the helm of the rebranded joint venture.
"We are excited to have a name that demonstrates that we are leading the United States and the world in financial services technology," Renzi said.
A revived concept and implications for conservatorship
The decision to open up the platform the GSEs have used to make their bonds more fungible marks an about-face from 2021's decision to
"That was part of the original idea behind the CSP, and that the CSP would be available to any lender, not just Fannie and Freddie. I think that still makes sense," said David Dworkin, president and CEO of the National Housing Conference
The repositioning of the securities platform might be a step toward releasing the GSEs from conservatorship.
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"One area that is complicated and difficult under any release from conservatorship is the common securitization platform," said Dworkin. "Under its current structure where it's exclusively available to both Fannie Mae and Freddie Mac that presents probably insurmountable antitrust issues."
Spinning off the securities platform could address the issue.
This would require launching "a real IPO and then have an independent board manage and govern the CSP, which would become essentially a utility company," Dworkin said.
"Spinning off the CSP gives you additional value for the CSP itself, and it likely enhances the value of the enterprises, because it adds value to their MBS," he said.
Proceeds use may face limits in administrative monetization
That strategy could play a role in addressing a goal related to finding a way to better monetize the GSEs, although it may not be entirely in line with the thinking of those who want Fannie and Freddie to be more like other private companies that trade publicly.
"What you have here that's really sort of makes it more complicated is you're trying to make this more like a public company in many ways, while putting in a utility," said Marty Green, principal at law firm Polunsky Beitel Green, in an interview this week, when asked about CSS.Whether a spinoff could be done administratively or would require congressional intervention could depend on use of the proceeds.
The Dodd-Frank Act requires that any funds gained from the exercise of government warrants that are part of the conservatorship and the sale of stock be solely used for deficit reduction.
"That clause of Dodd Frank would have to be removed in order to use the proceeds for anything but deficit reduction," he said.
Deficit reduction is in line with Trump administration goals, but the inability to use the funds for recapitalization that would help improve the GSEs' finances and prepare them for a release from conservatorship could be a reason to seek broader authorities to use the proceeds.
"NHC's position is that a stock sale with the appropriate legislative authority should be used for full capitalization and then other housing purposes," said Dworkin, who said this is one of several goals
