The Federal Housing Finance Agency (FHFA) today published An Update on Implementation of the Single Security Initiative and the Common Securitization Platform detailing progress toward further implementation of the Common Securitization Platform (CSP) and launch of a single, common security called the Uniform Mortgage-Backed Security (UMBS).
As announced previously, Fannie Mae and Freddie Mac (the Enterprises) and their joint venture, Common Securitization Solutions (CSS), will implement the Single Security Initiative (SSI) and issue the first UMBS in the second quarter of 2019. FHFA made that announcement in March 2017, more than 24 months in advance, to give market participants ample time to prepare.
The Update published today describes materials the Enterprises have developed about the SSI and its implementation, including the Market Adoption Playbook which identifies possible actions that different types of market participants should consider taking to ensure a smooth transition to the new securities, a video explaining the SSI, and an Illustrative Implementation Schedule. The Update also announces that the Enterprises have engaged Ernst & Young to facilitate communication and risk management plans, and to help align readiness activities.
“As implementation approaches, the Enterprises will accelerate and intensify their engagement with market participants about the Single Security Initiative,” said FHFA Director Melvin L. Watt. “I urge industry to take advantage of the resources available and to be ready for the transition.”
The Update describes steps the Enterprises and FHFA are taking to support alignment in matters affecting cash flows to investors. That alignment is central to the success of SSI and to enhancing the liquidity of the secondary mortgage market on an ongoing basis. Related to that alignment, the Update includes:
- FHFA’s guidelines for alignment on cash flows to investors from Enterprise mortgage-backed securities;
- the Enterprises’ change management processes, including their assessments of the potential prepayment effects of new initiatives or changes to programs, policies, or practices; and
- detailed examples of how FHFA monitors alignment of Enterprise prepayment speeds.
The Update also provides more information about the successful implementation of Release 1 of the SSI by Freddie Mac and CSS in November 2016. From implementation of Release 1 through the end of September 2017, Freddie Mac used the CSP for monthly issuance and settlement of approximately 1,000 new securities, representing about $55 billion in unpaid principal balance.
FHFA also continues to update the SSI/CSP timeline of key achievements on this project as milestones are reached.
FHFA welcomes public input on this Update from interested parties. Feedback can be submitted electronically via FHFA.gov, or to the Federal Housing Finance Agency, Office of Strategic Initiatives, 400 7th Street, S.W., Washington, DC 20219. All pertinent submissions received will be made public and posted without redaction to FHFA’s website.