FHFA Confirms June 2019 Implementation of Uniform Mortgage-Backed Security
The Federal Housing Finance Agency yesterday said Fannie Mae and Freddie Mac will start issuing a new, common security, the Uniform Mortgage-Backed Security, beginning June 3, 2019.
The new UMBS, which will replace current offerings of TBA-eligible mortgage-backed securities, will be issued through the Enterprises’ joint venture, Common Securitization Solutions, using the Common Securitization Platform.
FHFA Director Melvin Watt said the announcement is intended to provide market participants with certainty about the timing of the Enterprises’ transition to UMBS and enable them to make the preparations necessary to ensure that the transition is smooth. The announcement coincides with the Enterprises and CSS having attained completion of key application development for issuance of the UMBS on the CSP; completion of system-to-system testing; and initiation of end-to-end (pre-parallel) testing.
“The transition to the new, common security requires planning, investment and preparation by a wide variety of market participants,” Watt said. “We have now set the specific date that the Enterprises will start issuing the UMBS and I urge the industry to get ready now to ensure smooth, successful implementation.”
The Mortgage Bankers Association has strongly supports modernization of GSE business systems and software, particularly in tandem with the development of the UMBS. In an Issue Paper (https://www.mba.org/issues/residential-issues/the-csp-and-single-security), MBA said it is critical that the CSP be viewed in the long-term as a market utility open to all participants who are willing and able to pool eligible securities. MBA is represented on an advisory panel formed by the joint venture of the GSEs to provide input on the development of the CSP and the UMBS.
“Today’s announcement provides additional clarity on the timeline for implementation of the Uniform Mortgage-Backed Securities,” said Andrew Bon Salle, executive vice president of single-family business with Fannie Mae. “Our goal is to maintain a highly liquid housing finance market and create a stronger finance system.”
“We encourage all participants to continue with their preparation to allow for a smooth transition,” said Dave Lowman, Freddie Mac executive vice president of single-family business. “With our implementation in 2016 of the Common Securitization Platform, we paved the way for a combined Freddie Mac and Fannie Mae $3.5 trillion market of To-Be-Announced UMBS. We remain committed to working with the industry, under the direction of FHFA, to ensure the readiness of all parties involved in this complex undertaking.”
FHFA said as part of the movement toward introducing the UMBS, Freddie Mac has been using CSS operations for Data Acceptance, Issuance Support and Bond Administration activities related to current single-class, fixed-rate, mortgage-backed securities since November 2016. CSS has been using the CSP to process 1,000 new securities each month and performing monthly bond administration functions related to 260,000 single class securities backed by approximately 9.8 million loans.
With launch of the UMBS on June 3, 2019, Fannie Mae will join Freddie Mac in using the CSP and CSS operations for these functions. At that time, CSP and CSS operational capabilities will expand to include the administration of multi-class securities and commingled Enterprise UMBS and the production of UMBS disclosures. CSS and the CSP will then be performing bond administration functions for about 900,000 securities backed by nearly 26 million loans.
Links:
Single Security Initiative and Common Securitization Platform: https://www.fhfa.gov/PolicyProgramsResearch/Policy/Pages/Securitization-Infrastructure.aspx.
Single Security Initiative/Common Securitization Platform Timeline: https://www.fhfa.gov/PolicyProgramsResearch/Policy/Pages/Common-Securitization-Platform-and-Single-Security-Timeline.aspx.
