FHFA Sets Date For Issuance of New Common Security

0

Government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac will start issuing a new, common security – the Uniform Mortgage-Backed Security (UMBS) – in place of their current offerings of TBA-eligible mortgage-backed securities starting on June 3, 2019, the Federal Housing Finance Agency (FHFA) recently announced.

The new UMBS will be issued through the GSEs’ joint venture, Common Securitization Solutions (CSS), using the Common Securitization Platform (CSP), which is basically the technology infrastructure that facilitates the single security.

Mortgage lenders are encouraged to make the preparations necessary to ensure a smooth transition to the new, common security, which was first announced in 2014.

The launch date for the new single security comes after CSS hit three critical milestones: 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,” says Mel Watt, director of the FHFA, regulator of the GSEs, in a release. “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.”

As part of the transition to 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 about 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, the FHFA reports.

With the launch of the UMBS in 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.

As mentioned, Freddie Mac went live on the CSP in late 2016. At that time, the company had migrated most of its inventory onto the new platform. This was the first stage of the Single Security Initiative, also known as Release 1.

The second phase of the initiative, Release 2, involves Fannie Mae transitioning to the platform and both GSEs using the new single security. That was originally slated to happen this year, however, in March 2017, the FHFA announced that Release 2 had been delayed to 2019.

Leave a Comment
Your email address will not be published. Required fields are marked *

avatar
  Subscribe  
Notify of