Fannie Mae and Freddie Mac began issuing the Uniform Mortgage-Backed Securities (UMBS) on June 3, 2019.
This quarterly report provides market participants additional transparency into a sample of the data FHFA receives and reviews on a monthly basis. The report focuses on alignment of prepayment rates, which continues to be important to the success of UMBS and to the efficiency and liquidity of the secondary mortgage market. Ex post monitoring of prepayment rates is part of a broader effort to assure investors that cash flows from UMBS will be similar regardless of which Enterprise is the issuer.
This report provides insight into how FHFA monitors the consistency of prepayment rates across cohorts of the Enterprises’ TBA-eligible MBS, where a cohort consists of those Enterprise TBA-eligible securities with the same coupon, maturity, and loan-origination year and total combined issuance across the Enterprises exceeds $10 billion. A prepayment on a mortgage loan is the amount of principal paid in advance of the loan’s scheduled payments. Full prepayment occurs when a borrower pays off the loan ahead of the scheduled maturity.