Freddie Mac and Fannie Mae (the GSEs) have alreadyrntaken many steps toward standardization, Clinton said.  Under the direction of its conservator andrnregulator thernFederal Housing Finance Agency (FHFA) the GSEs have undertaken:</p<ul class="unIndentedList"<liThe Uniform Mortgage Data Program designedrnto standardize mortgage delivery data, servicing data, securitization disclosures,rnand appraisal data; </li<liThe Servicing Alignment Initiative whichrnestablished consistent policies and processes for servicing delinquent loansrnowned or guaranteed by the GSEs; and </li<liContract Harmonization which isrnmaking it more predictable, transparent, and efficient for the industry to dornbusiness with the GSEs. </li</ul

ThernGSEs are now working on what Clinton called “the biggest shared step yet”, therndesign and construction of the securitization platform that will replace their individual proprietaryrnsystems for securitizing mortgages and performing associated back office andrnadministrative functions. The CSP will use a utility approach in an attempt to reducerncosts, improve transparency, and lower barriers to entry for private marketrncredit risk takers and benefit taxpayers, borrowers, and the broader housingrnfinance system.   This initiative has thernpotential to increase competition among credit guarantors which might notrndevelop without it.</p

Standardizationrnhas its limits however and designers must make important choices about what isrnwithin the scope of the CSP and should be commoditized and what is outside andrnshould remain in the realm of competition. rnIf the platform is too narrow it won’t create the efficiencies it shouldrnnor attract private capital.  If it isrntoo broad it may commoditize functions that should be allowed to createrninnovation and competition. “Given the unequal starting points of potentialrnparticipants, this could stunt competition in the future”</p

As an example, Clinton pointed tornissuance of securities as being a function most think belongs within CSP.  Standardization there will reduce risk,rnsupport demand, and increase liquidity.  Inrncontrast, credit models, pricing, and customer relationships are generallyrnthought to be prime sources of differentiation, innovation, and competition andrnshould be left outside CSP.  </p

These decisions will influence howrnthe GSEs approach the platform today and how well it attracts private participants</band if it lowers barriers to entry or unintentionally reinforces them.   FHFA knows what they want to achieve with thernCSP, Clinton said, and are consulting the GSEs in their areas of expertise.  They understand, he said, "that whilernstandardization is a good thing, even good things can be overdone." </p