Five Questions: Time to Unify Fannie, Freddie Securities?

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Five Questions: Time to Unify Fannie, Freddie Securities?

Five Questions: Time to Unify Fannie, Freddie Securities?

WSJ-

Freddie Mac is facing a new problem as it nears the fourth anniversary of its government takeover: Investors are spurning its mortgage security in favor of its sibling, Fannie Mae.

To address that problem, calls are mounting within the industry for the mortgage giants’ federal regulator to move the companies towards trading on a common security. The American Securitization Forum, a trade group, is set to release on Monday a white paper endorsing such an effort.

Tom Deutsch, the group’s executive director, said that taking technical steps to make Fannie’s and Freddie’s mortgage bonds more homogenous could eliminate the pricing problems that have been plaguing Freddie Mac—there’s plenty more on how that could work in the paper. Freddie Mac and its regulator, the Federal Housing Finance Agency, declined to comment on any such plans.

Banks don’t keep most of the mortgages that they make. Instead, they sell them to investors—these days, primarily Fannie and Freddie—which package them together and sell them off as mortgage-backed securities.

Here’s a closer look at what’s happening:…

[WALL STREET JOURNAL]

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