Fannie Mae, Freddie Mac Begin Accepting Forward UMBS Trades

March 12, 2019

Fannie Mae and Freddie Mac yesterday announced they will begin accepting forward Uniform Mortgage-Backed Security trades with a trade date on or after March 12 and settlement dates on or after June 3.

The common single mortgage-backed security, known as the UMBS, is part of the Single Security Initiative, a new securitization infrastructure for Fannie Mae and Freddie Mac for mortgage loans backed by single-family properties. Common Securitization Solutions, a joint venture owned by the Fannie Mae and Freddie Mac, developed a Common Securitization Platform under direction of the Federal Housing Finance Agency, as well as operational capabilities necessary to run the CSP.

The announcements follow confirmation on March 7 from the Securities Industry and Financial Markets Association that its To-Be-Announced Guidelines Advisory Council approved revisions to good delivery guidelines for the UMBS. The SIFMA guidelines allow for forward June UMBS trades to be filled with existing Fannie Mae TBA-eligible MBS, or UMBS issued in June.

The SIFMA Decision Summary can be found at https://www.sifma.org/wp-content/uploads/2017/06/2019-03-05-TBAGAC_Decision-Summary.pdf.

Under the SIFMA updated Good Delivery Guidelines, UMBS issued by either Fannie Mae or Freddie Mac will be deliverable into UMBS TBA contracts for settlement starting June 3 (https://www.sifma.org/wp-content/uploads/2017/06/uniform-practices-2019-chapter-8.pdf).

Freddie Mac will no longer issue new Gold PCs with a 45-day payment delay after May 31. Beginning May 7, Freddie Mac plans to offer holders of 45-day, TBA-eligible and non-TBA-eligible PCs and Giants the option to exchange their eligible 45-day securities for 55-day Freddie Mac mirror securities. Freddie Mac’s retained portfolio will book the first exchange transaction in late-March 2019.

Fannie Mae and Freddie Mac said yesterday’s announcements are designed to allow lenders and investors to prepare for the orderly implementation of the UMBS and to ensure transparency.