December 15, 2016
The Federal Housing Finance Agency released its 2017 Scorecard for Fannie Mae, Freddie Mac, and Common Securitization Solutions. The scorecard highlights how the FHFA’s reform of Fannie Mae and Freddie Mac is proceeding apace, absent direction from Congress. This reform path had been set by Acting Director DeMarco, appointed by President Bush, and has continued relatively unchanged under Director Watt, appointed by President Obama.
The scorecard’s assessment criteria for the two companies are,
- The extent to which each Enterprise conducts initiatives in a safe and sound manner consistent with FHFA’s expectations for all activities;
- The extent to which the outcomes of their activities support a competitive and resilient secondary mortgage market to support homeowners and renters;
- The extent to which each Enterprise conducts initiatives with consideration for diversity and inclusion consistent with FHFA’s expectations for all activities;
- Cooperation and collaboration with FHFA, each other, the industry, and other stakeholders; and
- The quality, thoroughness, creativity, effectiveness, and timeliness of their work products. (2)
The scorecard states that Fannie and Freddie should increase credit risk transfers to investors. Currently, the focus is on transferring risk from pretty safe and standard mortgages, but the FHFA is pushing Fannie and Freddie to increase risk transfers on a broader array of mortgage types.
The scorecard also states that the effort to integrate Fannie and Freddie through the Common Securitization Platform and the Single Security should continue so that the Single Security is operational in 2018. The scorecard emphasizes that the Platform should allow “for the integration of additional market participants in the future.” (6) While this has been a design requirement from the get-go, I have heard through the grapevine that this element of the Platform has not been pursued so vigorously. To my mind, it seems like a key component if we want to build the infrastructure for a healthy secondary mortgage market for the rest of the 21st century.