FHFA Pushes Back Implementation Date of Single Security

FHFA announced in an update on Thursday, March 23rd that the implementation of a single security issued jointly by Fannie Mae and Freddie Mac will be delayed. According to an article in HousingWire, the initial target rollout for Release 2, which involves Fannie Mae and Freddie Mac issuing a single security on the Common Securitization Platform (CSP) was the first quarter of 2018. However, after an "extensive review of lessons learned", it has now been pushed back to the first quarter of 2019. This comes after Release 1, which involved Freddie Mac issuing its securities on the CSP in late 2016.

"This should provide greater assurance to market participants and policymakers that Release 2 will be successfully implemented," according to FHFA's update. "Just as Release 1 was a large and complex undertaking, Release 2 will be as well. In fact, Release 2 will entail additional complexity and challenges in that it will require close coordination with many market participants and vendors, as well as close attention to software development and back-office operations."

HousingWire notes that the GSEs have invested $454 million to develop the CSP and initiate operations of the joint venture overseeing the CSP, Common Securitization Solutions (CSS). The update breaks down the costs of "building" the CSP and single security up until now, versus "running" or implementing the single security. By 2019, FHFA estimates the total cost to "build" and "run" the CSP will be upwards of $1.1 billion, but that it expects to make that money back by eliminating the "persistent difference in the liquidity of Fannie Mae MBS and Freddie Mac PCs. In a statement, FHFA Director Mel Watt said, "I am also grateful for the support and input we have received from the public and from industry participants. I encourage all market participants to begin moving forward with their preparations to make the changes they will need to accompany implementation of the Single Security Initiative."

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