Date: October 13, 2014
Contact: Carol Danko, 202.962.7390, firstname.lastname@example.org
SIFMA Submits Key Recommendations to FHFA on Proposed Single GSE
Washington, DC, October
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 MBS
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.
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.
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.
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.
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
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
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 http://www.sifma.org.