The Securities Industry and Financial Markets Association (SIFMA) says it will soon publish an update to the Standard Requirements for Delivery on Settlements of Fannie Mae, Freddie Mac and Ginnie Mae Securities, also known as the Good Delivery Guidelines. The guidelines detail a number of market-practice standards regarding to-be-announced (TBA) trading of mortgage-backed securities (MBS) pools issued by the government-sponsored enterprises (GSEs) and Ginnie Mae.
The TBA market facilitates the forward trading of MBS issued by GSEs and Ginnie Mae by creating parameters under which mortgage pools can be considered fungible and thus do not need to be explicitly known at the time a trade is initiated. The TBA market is the most liquid, and, consequently, the most important secondary market for mortgage loans, according to SIFMA.
The guideline updates will reflect the decision by SIFMA to keep the maximum TBA-eligible original loan balance at current levels and clarify several longstanding market practices for good delivery.
SIFMA also expects the revised guidelines to more explicitly define the characteristics of standard loans that are acceptable for inclusion in TBA-eligible MBS pools. Concurrently, the revision will implement modifications to the nonstandard-loans section to codify existing market practice and further delineate which nonstandard loan products are eligible. SIFMA believes that these enhancements will improve the transparency of the TBA market.