The Federal Housing Finance Agency announced Tuesday that it has filed the paperwork to create a new common securitization platform that could serve as a potential replacement for Fannie Mae and Freddie Mac. The new firm could consolidate some of the redundant functions currently being performed by Fannie and Freddie.
FHFA announced that it had filed a Certificate of Formation establishing Common Securitization Solutions, LLC, described as an “equally-owned subsidiary” of Fannie and Freddie.
“The filing of the Certificate of Formation represents a significant milestone toward accomplishing the goal of building a new secondary mortgage market infrastructure,” said FHFA Acting Director Edward J. DeMarco. “We are pleased with the progress being made and look forward to further developments.”
FHFA also announced that office space had been secured for the new company in Bethesda, Md. A search is currently underway to recruit a CEO and a chairman of the board of managers for CSS.
The formation comes as Congress debates an overhaul of the government’s involvement in the mortgage market, with House Republicans insisting on the elimination of Fannie and Freddie, while a Senate bill would also wind the two companies down but leave some form of federal backstop in place. CSS would create a single standard for mortgage securitization which could survive if Fannie and Freddie were dismantled, according to a Reuters report.