The Federal Housing Finance Agency (FHFA) has issued a white paper on building a new infrastructure for the secondary mortgage market in preparation for redefining the roles of Fannie Mae, Freddie Mac and Ginnie Mae for the future. The FHFA seeks to make the new structure a model that can be used to jumpstart the private mortgage market.
Currently, about 75% of all mortgages are securitized through Fannie Mae or Freddie Mac, and most of the remainder is FHA loans bundled together and sold on the secondary market through Ginnie Mae. The private secondary market is almost non-existent, but is expected to revive gradually as the GSEs step back from this function.
The white paper describes some common elements that must be present:
–An operational structure that connects investors to borrowers by bundling mortgages and tracking payments;
–Rules defined in the pooling and servicing agreements that describe key functions that are set on a standardized model;
The FHFA seeks feedback on the draft document. A finalized plan is expected by December 31, 2012.