To improve the pricing and liquidity of its TBA-issued mortgage securities, Freddie Mac is willing to consider the creation of a common GSE mortgage-backed security.
Freddie chief executive Donald Layton told reporters that some industry officials believe savings could be achieved through the development of a common Fannie Mae/Freddie Mac mortgage security.
“We are interested in this,” Layton said Wednesday during a conference call. He noted the Freddie Participation Certificate “labors under a modest competitive disadvantage” in the TBA market compared to the pricing of Fannie MBS.
Freddie’s pricing disadvantage has varied over time. “It is higher now than it has been,” Layton said, in part because of the “unintended consequences” of the Federal Reserve’s QE3 MBS purchases.
The Mortgage Bankers Association is urging the
“On a typical day, ten times as much Fannie Mae MBS trades relative to much less liquid Freddie PC security,” MBA chief executive David Stevens said at the MBA’s National secondary Market Conference on Monday.
“By making MBS the common currency for both agencies we can enhance liquidity, reduce costs to taxpayers, and begin to lay groundwork for a more competitive and efficient secondary market,” Stevens said.
The Freddie Mac CEO noted that creating a common mortgage security is really in the hands of government officials, like FHFA, as opposed to Freddie or Fannie. And the Securities Industry and Financial Markets Association would also have a role in making such a decision.
