Industry Supports Single GSE MBS Platform, but Worries about MSR Fees

A Federal Housing Finance Agency proposal to upgrade and merge Fannie Mae and Freddie Mac’s securitization platforms appears to have industry support but there are caveats about "Phase 2" of the plan.  

In a new comment letter, five industry trade groups said they support FHFA’s decision to update Fannie and Freddie legacy systems and software and merge them into a single securitization platform.

However, the American Bankers Association, Consumer Mortgage Coalition, Independent Community Bankers of America, Mortgage Bankers Association and the Housing Policy Council of the Financial Services Roundtable have “several concerns” about Phase 2 of the MBS proposal.

Phase 2 calls for FHFA and the GSEs to develop a model pooling and servicing agreement (PSA) that could be for used for issuing both agency and private label MBS.    

The trade groups are concerned that a standardized agreement would incorporate GSE seller/servicer guidelines, which could allow FHFA to maintain control over changes to the PSA seller/servicer guide.

The industry groups contend Congress needs to make certain decisions first including who would own the securitization platform and who would be responsible for its development, governance and operations. This needs to be decided even before Phase 2 can be implemented, they argue.

“Phase 2 has the potential to alter the industry’s historic business model and should not be undertaken lightly. Ultimately it will be necessary for congressional direction as to the future of governmental involvement in the secondary market before many decisions can be made or for Phase 2 to be implemented,” the Dec. 3 comment letter says.

In a separate comment letter, MBA warns FHFA not to resurrect its joint servicing compensation proposal as part of its initiative to upgrade the GSE securitization platforms. Last year, FHFA proposed paying low monthly fees for servicing current loans and incentives for delinquent loans. MBA “reminds FHFA that most servicers and other constituents strongly opposed it,” MBA said.