Government sponsored enterprises Fannie Mae and Freddie Mac are now officially issuing a single common security, dubbed the Uniform Mortgage Backed Security (UMBS).
Last fall, the Federal Housing Finance Agency (FHFA) announced that it had completed testing of “Release 2” or the second phase of the transition to a shared platform.
In February, the agency issued a final rule on the new UMBS that required there GSEs to align their programs, policies and practices that affect the cash flows of “To-Be-Announced” (TBA)-eligible mortgage backed securities (MBS).
In addition, the final rule made explicit the potential consequences to the enterprises for misalignment.
The final rule also instructed the enterprises to lower the maximum mortgage note rate eligible for inclusion in an MBS.
In a statement, Mark Hanson, senior vice president, securitization for Freddie Mac, called the launch of the UMBS “one of the most significant accomplishments in our decade-long effort to improve the U.S. housing finance system.
“Americans will benefit from the efficiency and standardization brought about by this new common security,” Hanson says. “The success of the initiative is a direct result of Freddie Mac’s collaboration with Fannie Mae, Common Securitization Solutions, FHFA, and thousands across the U.S. housing finance industry. We are grateful for their hard work, and we join them in celebrating this achievement.”
Robert Fishman, deputy director of the Federal Housing Finance Agency (FHFA), regulator of the GSEs, says the launch of the new UMBS is a “significant milestone that combines the separate Fannie Mae and Freddie Mac To-Be-Announced markets into one, bringing additional liquidity and efficiency to the market.
“By addressing structural issues and trading disparities, the UMBS will benefit taxpayers and the nation’s housing finance system,” Fishman says in a statement.