The Federal Housing Finance Agency (FHFA) today announced that on June 3, 2019 Fannie Mae and Freddie Mac (the Enterprises) 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. The new UMBS will be issued through the Enterprises’ joint venture, Common Securitization Solutions (CSS), using the Common Securitization Platform (CSP).
This announcement provides market participants with certainty about the timing of the Enterprises’ transition to UMBS and enables them to make the preparations necessary to ensure that the transition is smooth. The announcement coincides with the Enterprises and CSS having attained 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,” said FHFA Director Melvin L. Watt. “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 movement toward introducing 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. With the launch of the UMBS on June 3, 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.