WASHINGTON Oct 7 The regulator overseeing major mortgage finance sources Fannie Mae and Freddie Mac on Monday said it filed legal paperwork to create a common platform for the two firms to issue mortgage-backed securities.
The regulator, the Federal Housing Finance Agency, said in a statement it established a new company called Common Securitization Solutions, LLC, as a limited liability company in the state of Delaware. The joint venture is intended to help securitize home loans and consolidate some of functions currently replicated by Fannie Mae and Freddie Mac.
The new company could eventually be privatized or merged into the government. Fannie Mae and Freddie Mac will have to abandon their separate systems.
"The filing...represents a significant milestone toward accomplishing the goal of building a new secondary mortgage market infrastructure," Edward DeMarco, the Federal Housing Finance Agency's acting director, said in a statement.
Fannie Mae and Freddie Mac, which help finance more than half of new U.S. homes loans, were seized by the government in 2008 as mortgage losses mounted. They have drawn nearly $190 billion in taxpayer aid to stay afloat while sending $146 billion in dividends back to the U.S. Treasury.
The new joint securitization company, CSS, will have its own chief executive officer and chairman, and will be funded by Fannie Mae and Freddie Mac. It will create a single standard for issuing securities that could survive independently if Fannie and Freddie no longer exist.
The new company will be housed in Bethesda, Maryland and the FHFA has already signed a three-year lease for the commercial office space.
The FHFA has also retained a recruitment firm to find suitable candidates for the top management positions at CSS.