Tuesday, November 18, 2014

CSS, what is it?

http://www.fhfa.gov/AboutUs/Reports/ReportDocuments/2014Scorecard051314FINAL.pdf

2014 scorecard FHFA!
Build a new single-family securitization infrastructure for use by the Enterprises and
adaptable for use by other participants in the secondary market in the future. [30%] finished
The Enterprises are to:
Continue working with FHFA, each other and Common Securitization Solutions, LLC to build and test the Common
Securitization Platform (CSP) and continue the implementation of required changes to the Enterprises’ related
systems and operations for integration into the CSP. The Enterprises’ work on CSP should incorporate the
following design principles:
 Focus on the functions necessary for current Enterprise single family securitization activities;
 Include the development of the operational and system capabilities necessary to issue a single
(common) security for the Enterprises; and
 Allow the option for the integration of additional market participants in a future system.
Identify key components, features and standards needed for a single (common) security in the CSP. Assess key
issues and begin to address these issues:
 Continue to explore other shorter-term changes that may improve market liquidity in the Agency MBS
market.

2014 Scorecard for the Common Securitization Solutions, LLC (CSS)
 Continue to build and test the Common Securitization Platform (CSP)
 CSS should focus its work with the Enterprises on the functions necessary for current Enterprise
securitization activities.
 This work should include the operational and system capabilities needed to issue a single (common)
security for the Enterprises.
 In addition, this work should allow for the option and the integration of additional market participants
in a future system.
 Complete and submit an updated plan for integrating with the Enterprises.
 Develop the CSS multi-year business and operational plan, including a budget.
 Work with the Enterprises to obtain and utilize industry input.
 Provide input to FHFA for periodic progress reports to the public.

http://www.fanniemae.com/portal/about-us/media/corporate-news/2014/6187.html

WASHINGTON, DC – Fannie Mae (FNMA/OTC) and Freddie Mac (OTCQB: FMCC) today jointly announced that the first chief executive officer (CEO) has been named for Common Securitization Solutions, LLC (CSS), which was established by the companies to build and operate the Common Securitization Platform (CSP), a new secondary mortgage market infrastructure. Additionally, Fannie Mae and Freddie Mac each appointed two executives to the CSS Board of Managers and signed governance and operating agreements for CSS.

Common Securitization Solutions, LLC is a jointly owned limited liability company formed between Fannie Mae and Freddie Mac for the purpose of designing, developing, building and operating the CSP. Common Securitization Solutions is equally owned by Fannie Mae and Freddie Mac and represents an important milestone in FHFA’s goal of building a new secondary market infrastructure. The intention of the CSP is to replace certain elements of the Fannie Mae and Freddie Mac proprietary systems for securitizing mortgages and performing associated back-office and administrative functions. 

http://fhfaoig.gov/Content/Files/EVL-2014-008.pdf

As of December 31, 2013, the Enterprises had spent approximately $65 million 

on the CSP’s development.
In 2012, the Federal Housing Finance Agency (FHFA or Agency) concluded 
that the back office systems by which the Enterprises securitize mortgages 
were outmoded and in need of being immediately upgraded and maintained.
Subsequently, FHFA, as conservator, directed the Enterprises to build the
Common Securitization Platform (CSP or Platform) to replace some parts of 

the Enterprises’ back office systems.
Under FHFA’s oversight, the Enterprises have made some progress in 
developing the CSP. An FHFA official told us that, as of March 2014, roughly
half of the necessary software development had been completed. According to 

FHFA, a consultant hired by the Enterprises found the CSP is well-designed. 

FHFA has also established an independent corporate entity, Common 
Securitization Solutions, LLC (CSS), that will develop, build, own, and 

operate the CSP. However, CSS, which is jointly owned by the Enterprises

The five functions discussed below are currently performed 
by the Enterprises’ back office systems and largely 

the focus of the CSP:

 Data Acceptance – Data acceptance is the process by which the Enterprises validate 6
loan level data associated with mortgages they pool and plan to securitize. For 
example, the Enterprises confirm that zip codes of the mortgaged properties are 
expressed in the correct format, i.e., in nine numbers. The Enterprises also confirm 
that the underlying mortgages conform to certain of the Enterprises’ MBS rules.7
 For 
example, with a 30-year fixed-rate security, the Enterprise will verify that all of the 
loans in the underlying pool contain the appropriate characteristics.
 Issuance Support – Issuance is the process of offering MBS to investors. To initiate
this process, the Enterprises transmit to the Federal Reserve Bank of New York basic 
facts about the security, the prospectus, and their initial disclosures. The Enterprises
publish initial disclosure information simultaneous to the security issuance.
 Disclosures – Disclosure is the process by 
which the Enterprises publish statements 
for their MBS investors that describe the 
securities issued and the characteristics of 
the underlying mortgage pools. The 
Enterprises publish disclosures using 
monthly data provided by servicers.
 Master Servicing Operations – The Enterprises serve as master servicers for the MBS 
they issue. Master servicing functions include the collection and reconciliation of loan 
data reported by the servicers. For example, the Enterprises compare their own 
calculations of expected monthly principal and interest payments with the amounts 
reported to them by servicers each month.
 Bond Administration – Bond administration is the process by which the Enterprises 
ensure that payments associated with their MBS are calculated and distributed 
appropriately. Bond administration includes calculating the monthly principal and 
interest payments for MBS. As part of this function, the Enterprises generate MBS 

performance metrics that are included in their monthly MBS disclosures.

Over time, FHFA has articulated a number of goals for the CSP, including: 
 Replacing elements of the Enterprises’ outmoded back office systems;
 Conserving taxpayer dollars by investing once (CSP) and using twice (by both 
Enterprises); 
 Providing a common and flexible platform capable of accommodating various 
securitization structures, including risk-sharing structures that may not be compatible 
with the Enterprises’ infrastructures;
Supporting other market participants, for example, issuers of private-label MBS
(PLMBS)19; 
 Facilitating policy changes, emerging standards, new technologies, and regulatory 
reforms;

CSS seems to be a way to revive the PLS market under the disguise of FHFA control and Fannie and Freddie oversight!!  

Further, FHFA expects the CSP to yield a net benefit to taxpayers. Specifically, FHFA 
anticipates that the development of the CSP, and the potential replacement of elements of the 
Enterprises’ proprietary infrastructures, will conserve taxpayer funds. Indeed, FHFA stated 
that the CSP “will be one way American taxpayers realize a return on their substantial 
investment in the Enterprises while also making it possible to retire the Enterprises’ 
proprietary systems…

Not retire the ENTERPRISES!

The CSP Will Not Fully Replace the Enterprises’ Back Office Securitization Systems
According to FHFA, when it is built, the CSP will be a separate IT system composed of five 
modules that will perform some of the Enterprises’ back office securitization functions 
described above more flexibly and efficiently.23
 That is, the CSP will enable the Enterprises 
to add functionality without having to rely on expensive manual changes, particularly at 
Fannie Mae. If executed as intended, the CSP could permit the Enterprises to reduce 
alteration and maintenance costs, test a specific module without affecting other modules,
accommodate new products, and create accessibility for other market participants.

While the CSP is intended to produce these benefits, it will not replace the Enterprises’ 
current back office systems entirely. The Enterprises will have to continue to maintain and 
use some of their existing systems for the following three reasons:
First, it appears that certain existing single-family securitizations may not be 
transferred to the CSP because of the complexity of designing a system capable of 
servicing both past and future products. 
 Second, the CSP will only support single-family securitization. The Enterprises will 
continue to use their existing systems for multifamily mortgage securitizations. There 
are no plans for the CSP to accommodate multifamily mortgage securitizations.
 Third, the Enterprises have some back office systems that will not be part of the CSP. 
For example, the CSP will not support master servicing functions for non-performing 
loans. Those duties will remain with the Enterprises.

 From the Demarco days:


The two government-sponsored enterprises have created a joint venture — Common Securitization Solutions, LLC — and signed a lease for 63,000 square feet of office space at 7501 Wisconsin Ave., according to the Federal Housing Finance Agency, the regulator and conservator of Fannie and Freddie.
The firm is expected to move in by January and eventually ramp up to between 200 and 250 employees, said Corinne Russell, an FHFA spokeswoman.
He announced plans for the new mortgage-backed securities firm in March, but its exact structure and function remain unsettled while Congress and the Obama administration deliberate on what will succeed Fannie and Freddie. Despite the housing recovery, the two enterprises continue to dominate the secondary market for single-family and multi-family mortgages.
“The overarching goal is to create something of value that could either be sold or used by policy makers as a foundational element of the mortgage market of the future,” DeMarco said in March.
Bethesda was chosen for the CCS headquarters to give it a physical presence separate from its corporate parents. Although Fannie and Freddie will own CCS initially, in the long term, it will be designed to be a key block in building a new secondary mortgage market infrastructure.
"The filing of the Certificate of Formation represents a significant milestone toward accomplishing the goal of building a new secondary mortgage market infrastructure," FHFA's Acting Director Edward J. DeMarco said.  "We are pleased with the progress being made and look forward to further developments."
The new company also has a likely new home.  FHFA said that authorized officials from both Fannie Mae and Freddie Mac had signed a three-year lease for office space in Bethesda, Maryland.
In a further indication that the new common platform may soon be up and running, the GSEs have employed an executive recruitment firm which has already begun identifying and interviewing candidates for key positions at CSS.  These include a chief executive officer and Chairman of the Board of Managers.


THIS IS not what Watt is saying less than a year later!!!!!!!!!!!! We know the positions were filled by Fannie and Freddie.
===========================================

So lets bottom line it.

it will not replace the Enterprises’ current back office systems entirely. 

The Enterprises will have to continue to maintain and use some of their existing systems for the following three reasons:

 First, it appears that certain existing single-family securitizations may not be 
transferred to the CSP because of the complexity of designing a system capable of 
servicing both past and future products. 

 Second, the CSP will only support single-family securitization. The Enterprises will 
continue to use their existing systems for multifamily mortgage securitizations. There 
are no plans for the CSP to accommodate multifamily mortgage securitizations.

 Third, the Enterprises have some back office systems that will not be part of the CSP. 
For example, the CSP will not support master servicing functions for non-performing 
loans. Those duties will remain with the Enterprises.

Federal Housing Finance Agency 
Office of Inspector General
http://fhfaoig.gov/Content/Files/EVL-2014-008.pdf

So the 5 trillion in loans single family will remain with F&F
the multifamily will remain with F&F
CSP will not support master servicing. F&F will, along with non performing.

CSS,CSP seems to be a way to revive the PLS market under the disguise of FHFA control and Fannie and Freddie oversight!!
I think it is interesting Warner and Warren are pushing for more openness from watt on CSP and its accounting.
But be sure, CSS is CSP. CSS will run CSP.
FHFA has also established an independent corporate entity, Common
Securitization Solutions, LLC (CSS), that will develop, build, own, and
operate the CSP. However, CSS, which is jointly owned by the Enterprises
NOTICE the word OWN!
Fannie Mae (FNMA/OTC) and Freddie Mac (OTCQB: FMCC) today jointly announced that the first chief executive officer (CEO) has been named for Common Securitization Solutions, LLC (CSS), which was established by the companies to build and operate the Common Securitization Platform (CSP), a new secondary mortgage market infrastructure. Additionally, Fannie Mae and Freddie Mac each appointed two executives to the CSS Board of Managers and signed governance and operating agreements for CSS.
NOTICE the CEO was picked by F&F, Not as Demarco was going to have it picked by a recruiting firm. Watt is making the future of PLS with F&F as the captains of the NEW ship.
using CSP, conservatorship can end. according to 2014 FHFA report in august CSP is 30% achieved.

It begs the question then if CSP is owned by CSS and that is owned by F&F, and if multifamily and legacy will remain with F&F, then how would you close F&F?

LOL the answer is you cant and you wont! When CSP is finished, 30% done now according to FHFA,  conservatorship will end by Watts stroke of the Pen.

Also would the dems dare give up all their work over the last 6 years on this over to a new FHFA regulator in 2 years? Knowing the NUKE option for a new director was used and now only 50% republicans needed to put the new presidents nominee in place of Watt? Obama is not popular and neither are the dems as of last election.
What about if they ruin housing with Republican give it to the banks bill? Johnson CRAP-o garbage. NO chance of this. NONE. Zero. Release is coming.
PLS will be run by F&F through CSS using CSP. 



1 comment:

  1. Great work, but getting a little dated. Have you seen the total spend amount recently? Probably over $100M. How about the recent letter for Corker, Warner, Crapo, et al? Went to Mel Watts last week. As a tax payer, I am concerned with the size and breadth of CSP and Fannie and Freddie's decades of history on large IT projects. This could very well crumble under the shear weight of bureaucracy.

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