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Research Group Expresses Both Support, Concern for FHFA Proposal

Fannie-Freddie-logos-twoFollowing the Federal Housing Finance Agency's (FHFA's) recent request for input on its proposal for a single security for Fannie Mae and Freddie Mac, the Urban Institute expressed support for the idea but concern that FHFA may be unnecessarily slow in implementing such a plan.

"FHFA's single security proposal is well-thought out and worthy of serious consideration and support by all key stakeholders," stated the Urban Institute on its Metro Trends Blog.

However, the institute is "concerned that FHFA may be contemplating a slower pace in the project than it warrants."

The securities "would combine the best features of each of the current securities," such that "the security would have the superior pooling features of the current Fannie Mae securities and the superior disclosure features of the Freddie Mac securities," according to the Urban Institute.

Under FHFA's proposal, Freddie Mac securities could be placed into Fannie Mae securitizations, and vice versa.

The Urban Institute supports the idea of single security for three main reasons, the first of which is that it has the potential to save the Treasury between $400 million and $600 million per year. These savings would take place as Freddie Mac would no longer have to subsidize its guarantee fees to originators to remain competitive and maintain its market share.

Second, the Urban Institute suggests a single security would lead to more competition in the mortgage market. A single security would remove some of Fannie Mae's advantage, leading it to rescind some of its market dominance. Ultimately, the institute suggests this could lead to greater access to credit in the mortgage market.

Lastly, a single security "could help pave the way for GSE reform," according to the Urban Institute.

About Author: Krista Franks Brock

Krista Franks Brock is a professional writer and editor who has covered the mortgage banking and default servicing sectors since 2011. Previously, she served as managing editor of DS News and Southern Distinction, a regional lifestyle publication. Her work has appeared in a variety of print and online publications, including Consumers Digest, Dallas Style and Design, DS News and DSNews.com, MReport and theMReport.com. She holds degrees in journalism and art from the University of Georgia.
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