The Federal Housing Finance Agency yesterday issued an update on the common securitization platform it is developing to issue the Single Security, a mortgage-backed security to be issued by both Fannie Mae and Freddie Mac. The agency said it will announce next year when the first securities will be issued through the platform.
The first platform software release will allow Freddie Mac to issue its current securities, and the second release will allow both GSEs to issue their own securities, as well as Single Securities. Each Single Security will be issued by either Fannie or Freddie and not cross-guaranteed by the others. It will have key features of Fannie’s current MBS and disclosures resembling those of Freddie’s bonds and will finance fixed-rate loans now eligible for financing through the TBA market.
The GSEs will be able to issue “second-level” Single Securities backed by first- or second-level securities from either GSE, and Freddie will offer investors the option to exchange legacy Freddie bonds for comparable Single Securities with compensation for the cost of the change in the payment delay.