Fannie, Freddie: Shared Data Protocol to Help Manage Risk

Fannie Mae and Freddie MacThe regulator over mortgage financing giants Fannie Mae and Freddie Mac said the two entities will share a new data collection protocol on loan and appraisal information that will improve risk management.
It could also help avoid the kind of pitfalls that nearly brought the two enterprises down at the peak of the financial crisis of 2008.
The Federal Housing Finance Agency (FHFA) said the new program will create improved data collection standards and strengthen the overall housing finance system.
But the regulator said the plan did not necessarily signal the combining of the two companies into a single entity.
Fannie Mae and Freddie Mac “have worked together for a number of years on non-policy business requirements, such as through development and maintenance of uniform mortgage forms and security instruments,” reads a statement on the new program. “The (government sponsored enterprises) are congressionally chartered, and thus any decision to change their role and/or structure rests with Congress.”
The Uniform Mortgage Data Program will enable Fannie and Freddie to “manage risk more effectively,” the FHFA said.
“This initiative is a major step toward meeting industry requests for uniformity in appraisal and loan data. Improvements in data quality will benefit all mortgage market participants and strengthen the housing finance system,” said FHFA Acting Director Edward J. DeMarco.
The Obama Administration has postponed until later this year or next year the overhaul of Fannie and Freddie, which were taken over by the government in September 2008 as they became overwhelmed from losses fueled by private-label securities backed by subprime mortgages and other high-risk paper.
Through 2012, the U.S. Treasury is providing an open-ended credit facility to cover quarterly shortfalls for each entity.
Fannie Mae’s total in bailout withdrawals is now at $83.6 billion; Freddie Mac’s at $61.3 billion.
FHFA said today that each enterprise has independently “gathered input from seller-servicers, appraisers and other market participants on the need for improved data and consistency in data definitions.”
Under the new standards, data submitted to Fannie and Freddie on loans sold to or guaranteed by them will include more complete and consistent data on:  loan characteristics; borrower information; the property securing the loans; and the identity of the parties creating the transaction.

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