Comment Detail

Comment

We are against the UMBS Pooling Practices proposal. This proposal is restrictive for our business of money management and for the market generally. It limits specified pooling and will effectively increase the size of major pools. The proposal is basically using G2 as the template, and G2 has substantially less liquidity than the conventional market. The proposal argues that having large pools increases market liquidity. This is incorrect. It also argues a better defined deliverable increases efficiency. This is also incorrect.

Cash window / major programs have increased to 70% of recent issuance. This is up from 25% in 2012. We would argue the market is no more liquid now than it was back in 2012.

Instead of mandating pool creation and allowing the GSEs to corner the market, it would be preferable to police seller and servicer behavior and separate these from TBA. The GSEs should not be bending to the non-bank servicer churning practices. If the proposal is enacted, the market will suffer the repercussions of having two entities, each with a massive conflict of interest between gathering market share and making mortgages affordable to the end borrower.

We would argue that the better alternative is to let the market decide on pricing. We have no doubt that this proposal will only increase the convexity cost of mortgages, and in the end, borrowing cost to the general home buying public.

Thank you.