SIFMA Submits Key Recommendations to FHFA on Proposed Single GSE Security Structure

Release Date: October 13, 2014
Contact: Carol Danko, 202.962.7390,                      

SIFMA Submits Key Recommendations to FHFA on Proposed Single GSE Security Structure 

Washington, DC, October 13, 2014— SIFMA today submitted a comment letter to the Federal Housing Finance Agency (FHFA) in response to the agency’s request for input (RFI) on a proposed structure for Fannie Mae and Freddie Mac (together, “GSEs”) to each issue a single form of mortgage-backed security (“MBS”) which is identical in structure and form:

“SIFMA’s members have been deeply engaged in discussion of how liquidity in the GSE MBS markets can be improved, including discussions of the potential risks and rewards of creating a single form of mortgage-backed security to be issued by the GSEs, and we welcome the FHFA’s request for input,” said Kenneth E. Bentsen, Jr., SIFMA president and CEO. “While we support the goal of improving liquidity in the TBA market, and recognize FHFA’s interest in closing the pricing gap between Fannie and Freddie’s MBSs, the movement toward a uniform market must be done with prudence and deliberation to avoid harming investors or mortgage borrowers. While there are potential benefits from the proposal outlined in FHFA’s RFI, there are also significant risks if the proposal were not implemented with appropriate caution, planning, and most importantly, broad understanding and support from a range of market participants.”

SIFMA has been focused on this issue for two years and formed a working group of its membership to discuss various options for combining the MBS markets of the GSEs. SIFMA’s response to FHFA explores both the risks and rewards of the proposed structure and its implementation. It discusses a number of issues where more clarity is required and where FHFA and the GSEs should undertake further examination, as well as areas where market participants will need to perform further diligence.  Among other issues, SIFMA makes the following five key recommendations to the FHFA in the comment letter. 

1. FHFA should continue to seek out and address industry feedback to ensure a very broad-based level of support for the proposal laid out in the RFI.  The success of the implementation of this proposal will be dependent on the level of support it receives from market participants.  SIFMA proposes to host an industry working group to work jointly with FHFA to further explore issues raised by the RFI.

2. FHFA should be highly confident that any changes to market pricing and liquidity will be net-positive before implementing any proposal similar to that described in the RFI.

3. FHFA should examine and clarify issues related to the identity of the guarantor to be faced by investors and other issues that promote legal certainty.  Any changes to the system must be durable.

4. FHFA must be prepared to take an active and ongoing role to ensure the improved and continued alignment of the performance of the GSE’s MBS, take steps to preclude policy implementation and competition for market share that could impair such alignment, and should involve the industry in discussions on this topic.  The performance of the GSEs’ MBS must remain fungible for this initiative to succeed. 

5. FHFA should reduce frictions in any transition to a new MBS issuance framework, including ensuring appropriate compensation to holders of legacy MBS for changes in payment delay upon exchange, and minimizing the costs of these exchanges.

The full text of the letter to FHFA can be found here.


 The Securities Industry and Financial Markets Association (SIFMA) brings together the shared interests of hundreds of securities firms, banks and asset managers. SIFMA's mission is to support a strong financial industry, investor opportunity, capital formation, job creation and economic growth, while building trust and confidence in the financial markets. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA). For more information, visit





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In New York:
Katrina Cavalli


 Liz Pierce



In Washington:

Carol Danko

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