In an effort to improve transparency, Fannie Mae and Freddie Mac will start to provide loan-level data for the new structured finance securities that they guarantee.
According to Fannie Mae's press release, this data will be updated on a once per month basis.
Regular readers know that once per month is the same frequency that performance data is disclosed for opaque, toxic sub-prime mortgage backed securities and is inadequate for investors to know what they own.
For investors to actually know what they own would require updating the loan-level data on an observable event basis. An observable event includes a payment is received, the loan becomes delinquent, the borrower defaults or the borrower files for bankruptcy.
With observable event based reporting, investors know what they are buying or selling because they always know the current status of every loan backing the security.
By adopting once per month reporting, Fannie and Freddie are reaffirming the standard for opacity set by sub-prime mortgage backed securities.
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