Fall 2013 Summit
Common Securitization Platform
Robert Fishman
Associate Director
Federal Housing Finance Agency
September 23, 2013
Robert Fishman: CSP
The MISMO Fall 2013 Summit Education Program is sponsored by:
Fall 2013 Summit
Background
o
In February 2012, FHFA issued its Strategic Plan for Enterprise Conservatorships. The plan sets forth three
strategic goals for the next phase of the conservatorships:
•
Build. Build a new infrastructure for the secondary mortgage market.
•
Contract. Gradually contract the Enterprises’ dominant presence in the marketplace while simplifying and
shrinking their operations.
•
Maintain. Maintain foreclosure prevention activities and credit availability for new and refinanced
mortgages.
o
The effort to create the Common Securitization Platform (CSP) for the secondary mortgage market will further
these goals.
•
Upgrades the existing outmoded Enterprise infrastructures
•
Facilitates programmatic credit risk transfer transactions
•
Provides options for policy makers as current infrastructure limits options
o
In October 2012, FHFA issued a white paper entitled, “Building a New Infrastructure for the Secondary Mortgage
Market.”
•
Proposed both a new securitization platform and a model contractual and disclosure framework
•
Highlighted FHFA’s key principles of promoting liquidity, attracting private capital, benefiting borrowers,
and operating flexibly and efficiently, while minimizing market disruption during the transition
•
Focused on operational functions that are repeated across the industry and for which greater standardization
would benefit the overall market
o
This presentation focuses on the CSP
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Fall 2013 Summit
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CSP Focuses on the Enterprises’ Securitization Activities
o The Enterprises’ Single Family business can be viewed as having several distinct components
o The CSP is focused on the Securitization component, to leverage automation and straight-through processing
Primary
Market
Role
Standards /
programs /
practices / tools
for (1)
underwriting /
originations
and (2)
servicing (PL
and NPL)
o
o
Commitment
process (loan
delivery
contracts)
Pricing
Loan
Aggregation
o
o
o
Cash Window
processes
Balance sheet
management
Pipeline hedging
o
o
o
o
o
o
o
Robert Fishman: CSP
Fall 2013 Summit
Credit and
Funding Risk
Investor
Loan Delivery /
Acquisition
Loan data submission, data quality
checks
Delivery eligibility checks (Guide,
contract, TOBs, pooling / allocation
criteria)
Document cert. processing / validation
Pool eligibility checks
Cash commitment delivery eligibility
checks
Exception / data correction processing
Funding (wire cash / security issuance)
High Level CSP Design
o
Loan
Sourcing
Data Validation
o
o
o
o
Credit Risk
standards
Counterparty
Risk
Management
Credit
enhancements
Risk
Analytics and
Costing
Issuance
Securitization
o
o
o
o
o
Data Validation
Security Issuance
Disclosures
Master Servicing
Bond
Administration
Disclosures
Credit Risk /
Loss Manag.
Operations
o
o
o
Master Servicing
PL Monitoring
NPL Management
(loss mitigation;
foreclosure
alternatives)
REO Operations
Bond Admin
Adaptors
Integration Layer & Data Repository
Adaptors
Issuers
FED/DTCC
Primary Servicers
Investors
3
Guiding Principles for the CSP
•
As outlined in the October 2012 white paper, the CSP will adhere to clearly defined design principles in
order to provide a sound foundation on which to rebuild the country’s secondary mortgage market and to
ensure that it is adaptable to policy and technology changes.
Technical Objectives
 Straight-through processing and event automation – Event-driven system architecture is being incorporated to minimize
manual intervention, facilitate efficient operations and performance, and allow for capture of operational and market metrics.
 Data transparency – Data architecture is being developed that provides data traceability and accessibility via common data
infrastructure and data standards.
 Open architecture – Standard external interfaces are being established for efficient interoperability with multiple
Issuers/Enterprises; leverage existing industry data standards (e.g., MISMO, Uniform Mortgage Data Program).
 Functional modularity – CSP’s internal components will communicate via standard interfaces to ensure that modifying,
configuring, replacing, or adding new functional modules can be accomplished with minimal impact across the CSP.
 Scalability – Integration architecture is being employed based on standard technologies with proven scale in financial services
and other industries, to ensure accommodation of growth demands and increased throughput.
Data Validation
Issuance
Disclosures
Master Servicing
Bond Admin
Adaptor
Adaptor
Adaptor
Adaptor
Adaptor
Integration Layer & Data Repository
Adaptor
Adaptor
Adaptor
Adaptor
Issuers
FED/DTCC
Primary Servicers
Investors
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Data Validation
o The Data Validation module currently includes the following capabilities, performing them as agent
for the Issuer:
• Validate request for securitization data (i.e., validate issuer identification, collateral pool
type, coupon, class codes, prefix checks, wiring instructions, servicer, etc.)
• Execute policy rule sets (i.e., SIFMA / “TBA” eligibility rules for fixed-rate and adjustable rate
MBS/PCs and Single Class Securitization (Megas / Giants))
• Perform calculations (weighted average coupon, weighted average maturity, etc.)
• Validate unscheduled event data (loan removal requests, primary servicer transfer requests,
data corrections, etc.
• Validate reference and market data (validate external collateral data and market indices)
• Manage Issuer / Guarantor requests (track all requests made by Issuers / Guarantors)
• Manage Issuer / Guarantor relationship (service level agreements, etc.)
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Security Issuance
o The Security Issuance module currently includes the following capabilities, performing them as agent for
the Issuer:
•
Register securities with the Fed or DTCC
•
Settle securities with Fed or DTCC (transfer securities to owner and remit cash proceeds to the Issuer)
•
Dissolve / Collapse pools
•
Generate “At Issuance” Disclosures
o This module will perform these functions for all of the following security types:
•
Single Class Securitizations
•
Single Class Resecuritizations (Megas/Giants)
•
Multi-Class Resecuritizations (REMICs, Strips)
•
Whole Loan REMICs and Senior / Subordinated Securitizations
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Disclosures
o The Disclosures module currently includes the following capabilities, performing them
as agent for the Issuer:
• At Issuance




Release documentation at offering
Release preliminary offering supplements
Release final offering supplements
Disclose collapse events
• On-Going




Release monthly pool and loan level disclosure files
Release tax disclosure files
Disclose dissolve / inactivation events
Release security level monthly distribution statement
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Fall 2013 Summit
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Master Servicing
o The Master Servicing module currently includes the following capabilities, performing them as
agent for the Issuer:
•
•
•
•
•
•
•
•
•
•
o
Set-up / on-board loans
Establish servicing contract
Process / report on loan activity
Collect and track payments (draft servicer remittances, cash management interaction with
Issuers, etc.)
Process changes (i.e., loan change requests, loan removal requests, primary servicer transfers)
Track servicing advances
Support servicer compensation requests for mortgage-related expenses and property
maintenance
Monitor / direct document custody / custodial performance
Roll-up loans to security (for first level Single Class securities)
Provide transactional data to issuers
The CSP will have Master Servicing capabilities that leverage straight-through processing; “high
touch” / decisioning activities will not be undertaken by the CSP.
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Fall 2013 Summit
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Bond Administration
o The Bond Administration module currently includes the following capabilities,
performing them as agent for the Issuer:
•
•
•
•
•
•
•
•
•
Set-up / on-board securities
Direct the collection of funds due to investors
Maintain security collateral
Manage advances
Perform tax reporting
Generate on-going disclosures
Provide reporting
Manage Single Class and Multi-Class Security processing
Manage bond distributions
o These functions would be performed for both Single Class securities and Multi-Class
securities (re-securitizations / REMICs)
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Other CSP Components
o Operational Data Store
o Transactional Data Stores
o Data Interfaces
o Message Bus
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CSP Next Steps
o In light of the importance of this initiative to the housing finance system, and reinforced by the
comments received from the public, FHFA has directed the Enterprises to move forward on the
development of the CSP.
o On March 4, 2013, FHFA issued the 2013 Conservatorship Scorecard for Fannie Mae and Freddie
Mac, which states that the Enterprises shall undertake the following in 2013:
• “In conjunction with FHFA, continue foundational development of the CSP:
• Establish initial ownership and governance structure for the CSP. Assign
dedicated resources and establish independent location site for the CSP Team.
• Develop the design, scope and functional requirements for the CSP’s modules and
develop the initial business operational process model.
• Develop multi-year plan, inclusive of CSP build, test and deployment phases and
the Enterprises’ related system and operational changes.
• Develop and begin testing the CSP.
• Support FHFA progress reports to the public on the design, scope and functional
requirements. Update documents based on feedback received.”
o FHFA and the Enterprises are currently working on each of these objectives.
Robert Fishman: CSP
Fall 2013 Summit
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Questions?
Robert Fishman
Federal Housing Finance Agency
202-649-3527
Robert.Fishman@FHFA.gov
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