FHFA Announces Next Steps for GSE UMBS Pooling Practices
The Federal Housing Finance Agency yesterday directed Fannie Mae and Freddie Mac to “further align their practices for evaluating seller and servicer prepayment related activities.”
The action came as FHFA issued its quarterly Prepayment Repot on progress Fannie Mae and Freddie Mac have made through its Unified Mortgage Backed Securities, designed to promote efficiency and liquidity of the secondary mortgage market, and provide transparency and insight to market participants about how FHFA monitors the prepayment rates of the Enterprises’ “To-Be-Announced”-eligible securities.
FHFA said the new alignment actions include creating:
- A common framework for seller and servicer prepayment analysis;
- Common metrics for measuring seller and servicer performance;
- Aligned framework for common prepayment thresholds, triggers and actions; and
- Aligned policies to review, monitor, and sanction seller/servicer refinance practices.
FHFA also instructed Fannie Mae and Freddie Mac to recommend best practices for sellers and servicers in the evaluation and monitoring of broker and correspondent prepayment performance, including:
- Key patterns and measures that should trigger further seller and servicer review of broker/correspondent performance; and
- Developing a set of best practices to protect consumers, including evaluations to prevent predatory practices and ensure reasonable consumer protection.
FHFA reported since UMBS forward trading began in March 2019, more than $43 trillion worth of UMBS trades have taken place in the TBA market. “Market pricing indicates that Fannie Mae and Freddie Mac MBS are trading at parity, creating a more level and competitive secondary mortgage market,” FHFA said.
