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Counting Down to Launch of the UMBS

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Published: 3/20/2019

​Implementation of the Uniform Mortgage-Backed Security (UMBS) is on track as Fannie Mae and Freddie Mac (the Enterprises) finish preparations for the June 3 launch.  This has been a multiyear strategic process, and FHFA, the Enterprises, and the broader industry continue to hit key milestones toward this launch date.  Here are some key updates about our progress. 

​On March 4, Fannie Mae and Freddie Mac held the Single Security 2019 conference in New York City.  At the  conference, over 400 attendees heard updates from the U.S. Department of the Treasury, FHFA, key Enterprise executives, and other industry leaders.  As part of the meeting, industry stakeholders discussed key system updates, third party provider changes, index changes, and much more.

A milestone in February was FHFA’s issuance of a final rule on the UMBS.  The final rule addresses feedback from commenters on ​the Notice of Proposed Rulemaking by making durable changes to the predictability of cash flows to MBS investors by requiring both Fannie Mae and Freddie Mac to align programs, policies, and practices that affect the cash flows of “To-Be-Announced" (TBA)- eligible Mortgage-Backed Securities (MBS).  The rule has been well received by market participants and represents just one of many steps taken by FHFA, the Enterprises, and the industry over the last seven years.

SS conf RF with Schultz and Hanson.PNG

Pictured: Robert Fishman (FHFA), Renee Schultz (Fannie Mae), and Mark Hanson (Freddie Mac) discuss Enterprise alignment and security performance at the Single Security 2019 conference.

Shortly after the final rule was issued, SIFMA’s TBA Governance Committee voted on March 7 to change the TBA good delivery guidelines to accept the new UMBS as good delivery for trades on or after March 12 and settlements on or after June 3.  Following the SIFMA vote, both Fannie Mae and Freddie Mac issued news releases announcing they were prepared to issue UMBS on the June 3, 2019 date.  Common Securitization Solutions (CSS) also continues to meet milestones toward finalizing the new securitization infrastructure for the Enterprises.  The new UMBS will be issued by each Enterprise through CSS, using the Common Securitization Platform.     

At the same time, Freddie Mac is getting ready to implement the Gold Participation Certificate (PC)-to-UMBS exchange portal and will begin to offer exchanges of the legacy Gold PCs for UMBS.

The Enterprises have conducted extensive outreach to prepare investors, dealers, vendors, software providers, custodians and many other stakeholders over these past two years.  Market participants have been updating their operations and compliance functions in order to be ready for the June 3 implementation.

There are many resources available to assist market participants still getting ready, including a video and Market Adoption Playbook and other materials that you can find on the dedicated website pages that FHFA, Fannie Mae and Freddie Mac have about the Single Security Initiative.  The Treasury Market Practices Group (which is sponsored by the Federal Reserve Bank of New York) has also encouraged market participants to be mindful of the group’s recommended best practices for the TBA market as the UMBS transition occurs.  Feel free to reach out to Fannie Mae, Freddie Mac or FHFA if you have a question about the UMBS transition.

The UMBS is one of the most significant changes to the mortgage-backed security marketplace to take place in decades.  When fully implemented, the UMBS will help create a more liquid, fungible and transparent security, which will be good for the housing finance market and the public at large.  The countdown is on!

Tagged: UMBS; Uniform Mortgage-Backed Security; Mortgage-Backed Securities (MBS); Fannie Mae; Freddie Mac; Single Security Initiative; Rulemaking; TBA Market

By: Liz Scholz

Associate Director/Office of Strategic Initiatives
FHFA / Division of Conservatorship

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